Tuesday, 11th November 2008 - 14:46CET
Updated: HSBC, BOV reduce their base rates
HSBC and Bank of Valletta said this afternoon that it they were reducing their interest rates as a result of last week's ECB interest rate change.The ECB had lowered its rate by 50 basis points.
HSBC said it is reducing its base rate for all lending rates except home loans to 3.55% (from 3.95%). The Home Loan Base Rate, which is the base for the bank’s variable mortgage lending, is being reduced to 3.35% (from 3.75%), the bank said.
The revised base rates are effective as from Wednesday, November 12.
Term deposits rates have also been reduced but the bank said interest on savings accounts has been reduced by less than the ECB rate cut, to benefit customers. The bank has also retained its higher rate on the HSBC On Line Savings Account which includes a 3% p.a. rate for balances over €5,000. This is in line with bank policy to encourage use of electronic banking and its automated channels.
Bank of Valletta said it would be changing its interest rates from Friday.
The savings accounts rate will be reduced by 0.25% resulting in an effective interest rate of 1% per annum. Interest rates on all other deposit accounts denominated in euro will also be revised downwards.
The mortgages base rate will be reduced by 0.50% per annum to 3.25% while the base rate for commercial loans, overdrafts, personal loans and credit card accounts is being reduced to 3.45%.
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Following the reduction of 0.5% last month Lombard remained pretty sitting without moving a figure. What about this month? Why dosen't The Times report on small banks ? Can the MFSA please light a candle on this ...to save some energy :)
The euribor rate is the rate at which banks lend to each other as you rightly stated. BUT its not the base rate. The base rate is always set by the Central Bank only. On loan contracts, the loan rate is a premium on the base rate. Now if the bank is having problems to lend money from the Central Bank and has to increase its realiance on euribor, than its bad management. And bad management should reflect on bank performance and not being paid by its customers.
In fact, a large number of commercial loans have their premiums set on 1 month Euribor. So the bank can cover its overdependence on Euribor by basing part of its assets (commercail loans) on the same basis. But still the BASE RATE is still one. Its still the ECB rate in our case. If banks would like to pass over the increases in Euribor rates, they should reprice and renegotiate their loans to be based on euribor rates.
Imposing a higher BASE RATE because of higher Euribor rates is FRAUD. Asset Liability Management should be responsable for any losses in its policy and not customers. MFSA PLEASE NOTE.
What the banks are doing they are inviting ppl to leave their savings there and then do not match up the motivation to get new loans etc so the banks can ride on more cash.
If people want a more competitive savings rate they should not expect me as a lender to subsidise their savings
1. The base rate is the rate at which the Central Bank PAYS Banks to deposit funds. Not the other way round
2. According to BASEL 2, all banks (not as you stated Maltese banks, min fejn gibtha din!) must have a level of capital adequacy according to Tier 1 and Tier 2 capital. Your comment on deposit to lending ratio is childish and non-sense.
3. The 'cost of money' is not the base rate but the 'risk free rate' This is totally different, and is set by the market daily. Just look at Euribor rates to have a clue.
4. There is no one single reason why banks should differentiate their base rate on different loans. As you may well know (hopefully) bank adjust their risk position by increasing the premium on the BASE RATE. So the higher the risk, the higher the premium. SO THERE SHOULD BE ONLY ONE BASE RATE.
5.What makes banks safe is not the level of cash they hold, but the trust customers have. In recent weeks we just witnessed this phenomena.
Last week, the European Central Bank lowered its base interest rate by 0.5% to 3.25%, with effect from 12 November 2008 (hence the day). On the same day, it also reduced the rate at which it lends to / borrows from banks on a short term basis (1day) to 3.75% and 2.75%, respectively.
When a bank lends money to another (interbank), they use Euribor (Euro Interbank Offering Rate check: www.euribor.org ) as a base rate and not any ECB's key rate. A common tenor used is the 1 month euribor, which between Thursday and Friday contracted by just 0.148% notwithstanding ECB lowered its rate by 0.5%.
Against this background, I think that the fact that banks did not pass all the savings to their customers on loans is justifiable. Mind you, compared to the rest of the eurozone, mortgages in Malta are amongst the lowest as other banks normally use Euribor.
Now to be fair, criticism would have been justified should banks reduces interest paid on savings/deposits by 0.5%.This was clearly not the case but no one bothered to write about it here.
Whatever you say the eu is a dictatorship which does not allow governments of member countries to do what is necessary for their country and its citizens with their one-size-fits-all policies.
Any decent economist and decent person can tell you that.
you cannot change bank becuase all banks work the same and the agree prior to amend the rate
In Europe the base rate is set by the ECB, in the UK by the Bank of England, in the US by the Federal Reserve ( FED).
The Base rate is the rate of interest the Central Bank charges Banks for lending them money.
It is also the rate the Central Bank pays Banks for any money they deposit with the Central Bank
The Central Bank lowers the interest rate to stimulate the country’s economy. ( Monetary Policy )
When demand for goods and services falls businesses may close , unemployment rises , the economy goes into recession.
Lower interest rates hopefully encourage businesses to invest and consumers to spend thus stimulating the economy.
When Banks do not pass on the reduction in interest rate to their customers – they are defeating the scope of the exercise.
Businesses do not invest, Consumers do not spend - the economy is not stimulated.
Many Banks played a major role in causing the present financial crisis - now they cannot be allowed to aggravate the economic crisis
Dr Frank Portelli MD FRCS (Ed)
This is the result of decisions taken by those eu petty dictators at the ECB. So why are you always grumbling against the MLP and its leader?
emanuel muscat
All the banks are not only a cartel, but now they have been organized as a cartel by the ECB which dictates everything. Some people are already living in Oliver Twist times, and many more will soon follow with the Gonzipn Government and the eu petty dictators diktat.
did the EU reduce rates to accomodate banks or to accomodate the economy as a whole?
you cannot move to another bank coz all banks did the same thing when they reduced rates- thats not grumbling - thats a CARTEL!!!!
The uk citizens found the protection of the state when lower prices where not passed on to customers - why shouldnt we?
So please remove your blinkers !!
What is the fuss about here? Our loans are getting cheaper! What is the problem here?!?!
the funny bit is the BOV will follow suit and do just exactly the same... were is the competition in Malta???
The base rate has decreased to 3.25% but the base rate for loans with HSBC is set at 3.55%. Where's the MFSA to protect us the clients. The ECB decreased the interest to boost the economy, while here, HSBC keeps part of this decrease in their pockets. The MFSA should investigate why the decrease was not passed in full to customers. Hope BOV won't follow with the same approach.