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Evening Standard
Evening Standard
Business
Simon English

Postings comments show savings market has its funny side

Bank joke of the week (they always do at least one) comes from David Postings, the CEO of UK Finance, a trade body. 

The Government is offering an unfair rate of return on savings products, he complains. The best one-year fixed-rate bond from NS&I pays a tasty 6.11%. Such deals create “distortive competitive pressures for intermediate and specialist deposit-takers, who are less able to absorb the costs to compete”, posts Postings.

The banks would have to put up the price of loans to compete with such deals, which would be a “difficult decision in the current economic environment”. 

When it comes to such banks, they cannot compete on either loans or savings. 

So, (clears throat), what is the point of the banks? 

Mr Postings, who is just doing his job, can’t be asking that the Government withdraw from banking. They would go bust without us. In fact, in 2008, they did, and we had to bail them out. 

When nominally free-market businesses — the super-efficient, lean ones — complain that they can’t compete with the clunky, over-staffed state bureaucracy you have to laugh. Especially when it is an industry that entirely relies on government subsidy — the knowledge that it cannot be allowed to go broke in the first place. 

As for the notion that loans would have to be more expensive to cope with government savings deals, well, that’s an interesting confession. 

When watchdogs complain about bank profiteering — the gap between what they charge on loans and pay on savings — the banks say, it doesn’t work like that. 

They are right about that, it doesn’t. They are not using your savings to make me a loan. The big banks borrow in the markets, where the cost is based on future interest rates, not on present savings rates.

If some banks can’t compete with the Government, let them merge with those who can, or be repossessed. Like banks do. 

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