Negative bank interest rate?

[desprateseagull]

http://www.bbc.co.uk/news/business-27717594

how's that work then- they charge to hold your money, while lending out at gazillions per cent?

 

[larus]

http://www.bbc.co.uk/news/business-27717594

how's that work then- they charge to hold your money, while lending out at gazillions per cent?

Err, no. The ECB will be charging banks a negative interest rate when they deposit money overnight with it. This it to encourage them to lend more money.

However, this raises even more questions. After the reduction of western central banks interest rates to as good as zero and the negligible effect this had had on growth, might it be possible that there are other major problems. Such as asset bubbles (property), or an elite class who want to cream money off society. We should have accepted the financial crash, allowed asset prices to adjust accordingly and become affordable and reset the system. What the west is doing will not work. We need to be honest about what is affordable and also ensure that the super rich do not get away with paying their share.

 

[Igzilla]

Err, no. The ECB will be charging banks a negative interest rate when they deposit money overnight with it. This it to encourage them to lend more money.

However, this raises even more questions. After the reduction of western central banks interest rates to as good as zero and the negligible effect this had had on growth, might it be possible that there are other major problems. Such as asset bubbles (property), or an elite class who want to cream money off society. We should have accepted the financial crash, allowed asset prices to adjust accordingly and become affordable and reset the system. What the west is doing will not work. We need to be honest about what is affordable and also ensure that the super rich do not get away with paying their share.

One could argue (without any tangible evidence) that it's the super rich who determine fiscal policy anyway. I fear the only way to truly reset the system will involve a lot of running about with pointed sticks and blood flowing freely in the streets. Then give it twenty years before we come full circle again

 

[London Irish]

Err, no. The ECB will be charging banks a negative interest rate when they deposit money overnight with it. This it to encourage them to lend more money.

However, this raises even more questions. After the reduction of western central banks interest rates to as good as zero and the negligible effect this had had on growth, might it be possible that there are other major problems. Such as asset bubbles (property), or an elite class who want to cream money off society. We should have accepted the financial crash, allowed asset prices to adjust accordingly and become affordable and reset the system. What the west is doing will not work. We need to be honest about what is affordable and also ensure that the super rich do not get away with paying their share.

Problem is it wouldn't have been the elites and super rich suffering with a depression level slump, but ordinary joes hit by crash levels of mass unemployment. But draghi flopped today and the euro rising has told him so. QE next on the list then, years after everyone else

 

[ditchy]

Nothing to do with super rich or any other individual as such. It is the collective rates that banks get when they deposit their (our) money overnight. The banks can either make it work by lending to other sources ie small businesses other banks etc or they can be lazy and just deposit it with the central bank and get previously as in uk an over night rate equivalent to . 5 percent . The ECB has now stopped that forcing them to lend or pay a charge to deposit . If banks feel that it is too greater risk to lend they will pay the charge to deposit. .The Bof E were warning Barclays as they had exceeded their maximum deposit rate with them which stood at £35 bill . At one stage Barclays had close to £ 55 bill on overnight with the B of E . We haven't got to that stage here yet but it is encouraging banks to work for their money with the stick rather than the carrot beforehand and quite rightly so.

 

[yxee]

What stops them just NOT depositing their money overnight?

 

[GreersElbow]

Err, no. The ECB will be charging banks a negative interest rate when they deposit money overnight with it. This it to encourage them to lend more money.

However, this raises even more questions. After the reduction of western central banks interest rates to as good as zero and the negligible effect this had had on growth, might it be possible that there are other major problems. Such as asset bubbles (property), or an elite class who want to cream money off society. We should have accepted the financial crash, allowed asset prices to adjust accordingly and become affordable and reset the system. What the west is doing will not work. We need to be honest about what is affordable and also ensure that the super rich do not get away with paying their share.

Don't be daft! we'll never let capitalism work! /sarcasm

 

[LamieRobertson]

What stops them just NOT depositing their money overnight?

You mean hide it all under the pillow...crafty

 

[Kevlar]

the idea is to the bring the rate of loans and savings down
to discourage savings and encourage spending to fight deflation
but banks have little leeway to pass on lower loan rates
as this represents their profits and incentive to lend
also their is a requirement to hold a small % of their deposits
with the central bank .Households and firms do not borrow money
to stuff in a mattress .When they buy stuff they deposit money
in the accounts of those they buy from in this way loans
build bank deposits and add to the required minimum reserve they need to
deposit at the central banks.
The only way negative rates can stimulate the economy is to
persuade households and firms to spend and invest as the rates of interest
on savings decline.

 

[Super Steve Earle]

Nothing to do with super rich or any other individual as such. It is the collective rates that banks get when they deposit their (our) money overnight. The banks can either make it work by lending to other sources ie small businesses other banks etc or they can be lazy and just deposit it with the central bank and get previously as in uk an over night rate equivalent to . 5 percent . The ECB has now stopped that forcing them to lend or pay a charge to deposit . If banks feel that it is too greater risk to lend they will pay the charge to deposit. .The Bof E were warning Barclays as they had exceeded their maximum deposit rate with them which stood at £35 bill . At one stage Barclays had close to £ 55 bill on overnight with the B of E . We haven't got to that stage here yet but it is encouraging banks to work for their money with the stick rather than the carrot beforehand and quite rightly so.

You can beat up a bank for not lending, but you can't force a customer to borrow. Even really low rates don't help if there isn't the confidence in ability to make the repayments.