Feb 26 2009, 12:24 PM
QUOTE(cherroy @ Feb 26 2009, 11:47 AM)
Not that serious lar. Just feel not right.
BNM lower down interest rate which primary intention is to cheapen the borrowing cost and spur economy acitvities, but if banks don't want to lower the same degree of reluctant to lower (but they instantly lower the FD rate), then it makes no different for BNM to lower the rate. All interest cut benefit are being channelled into more profit for the banks only, while those FD depositors and pensioner getting little interest out of it, but banks still charge the same loan of interest on loan given. The margin of profit (BLR-Fd rate) is widen.
Mod, I see your point....I really do.....Sometimes, bankers are D@mn blardee unscrupluous.BNM lower down interest rate which primary intention is to cheapen the borrowing cost and spur economy acitvities, but if banks don't want to lower the same degree of reluctant to lower (but they instantly lower the FD rate), then it makes no different for BNM to lower the rate. All interest cut benefit are being channelled into more profit for the banks only, while those FD depositors and pensioner getting little interest out of it, but banks still charge the same loan of interest on loan given. The margin of profit (BLR-Fd rate) is widen.
May I share my point of view? Feel free to disagree.
1. I'm paying BLR - 2.2% for my loan. Assuming my banker lowers BLR to 5.55% - I'm paying 3.35%. Bank's cost of funding is not necessarily at 2%. They also have prudential liquidity and hedging cost to worry about. Let's say for the sake of discussion - Cost of Funding is at 2.5%. Their gross margin is already 0.85%.
2. 0.85% does not take into account legal subsidies, sales staff commission, other ancillary costs and credit losses. In other words, banks are losing money for the first 3 years (bare minimum) for ZEC packages.
3. Hence why banks protect themselves with early penalty fees for the first 5 years etc.
4. For duration matching - banks may have locked in FD's at a higher rate before the OPR drop. In other words, they need to immediately drop their new FD rates for new depositors to protect their a$$.
5. Am I defending bank's actions? - NO, i am not. I agree with u that this is very unfair to the pensioners and risk averse investors which depend heavily on deposits. Their savings are being literally eaten by inflation.
6. However, it is a tad bit too much IMHO to say that what BNM is doing makes no difference to the economy. It has certainly lightened my payment load - and for countless others who have mortgages to service. It has also made SME's loan commitments much lighter.
7. What irks me most is that some banks may be tightening their lending policies - just for the sake of being conservative. i.e. through lower margins, stricter valuations, etc etc. Good companies are seeing their OD lines being cut because of "industry perceived risk". All sense of good credit judgement on an individual may be thrown out the window.
To me, point 7 above is what's doing maximum damage to our economy. In that sense, any tweaking to monetary policy will remain impotent. I hope that BNM will soon realise this fallacy and take remedial action.
cheers
This post has been edited by Phoeni_142: Feb 26 2009, 12:26 PM
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