In recent years, savers have struggled to find decent returns on their savings accounts, only to discover that their hard-earned cash has been quietly lining the pockets of the banks. New figures have revealed that banks across Europe made an eye-watering €1.8bn in profits from savers’ cash over the last twelve months. This news has sparked outrage among consumers who feel they have been ripped off, prompting calls for greater transparency from the banking sector. In this article, we delve deeper into the “rip-off” claims and explore what this means for savers and the banking industry as a whole.
The retail banks in Ireland have been accused of exploiting their customers by paying them nominal interest on their savings and utilizing their funds to make billions of euros. The Central Bank Governor, Gabriel Makhlouf informed TDs and senators that the banks were earning around €1.8bn a year by depositing household and business deposits with the European Central Bank (ECB), using savers’ money to “subsidize” mortgage holders. According to ECB statistics, the interest rates paid on so-called term deposits, where money is locked away for a particular period, are among the lowest in the Eurozone, with an average return of only 1.02%. In comparison, the average rate for term deposits in the Eurozone is around 2.01%. The Central Bank revealed that Irish banks enjoy €60bn of surplus funds earning a 3% rate with the ECB. Sinn Féin TD Imelda Munster challenged the Governor for not encouraging banks to pass on the benefits of the ECB deposit interest rates to consumers, who are paying a low rate of interest. Munster claimed that Irish depositors were being ripped off while inflation is at 7.7%, and recommended that the regulator should regulate the sector and take action on this issue. Last month, the interest paid on new State Savings products increased for the first time in 16 years after six rate hikes by the ECB. Although the new interest rates are higher, they are still considered low compared to the ECB deposit rate of 3%, which is expected to rise again next month.
It is clear that the issue of banks making huge profits from savers’ cash is not going to go away anytime soon. Customers who have been trusting their banks to provide them with fair and honest service are rightfully outraged by the recent revelations, and it is up to the banks to take responsibility and address the concerns of their clients. The financial industry has a duty to provide transparent and reliable services for their customers, and it is essential that they fulfill this obligation. The banking sector needs to work towards establishing a fairer and more equitable system to benefit savers, ensuring that they are no longer subject to these unjust practices. Only then can we believe that our trust is well-placed in the banking system, and that the savings we invest are not being unfairly exploited.
