The Ryan Review

DESPITE the juxtaposition of floor-thumping interest rates alongside a roaring economy, it seems householders are still suffering from what my financial pal Frank Conway calls “Financial Post-Traumatic Stress Disorder”. It’s the only explanation for the increase in household deposits in banks and state instruments, bringing it to €101bn for the first time ever.

Money hoarding, as opposed to investing or paying down debt, is the action of a public not yet convinced there won’t be more rainy days around the corner, but if getting zero return on their cash doesn’t worry them, perhaps negative interest rates will.

Bank of Ireland and, more recently AIB, announced that they are going to allow themselves apply negative interest rates on funds. Even though both ‘pillars’ were gifted a bailout by the taxpayer, this will be new language for them to learn: the bailin.

Being charged to mind your money is not a new concept, of course; many foreign banks do it especially those outside the Eurozone. And, for now at least, it won’t apply to normal customer deposits, but to big funds they operate commercially.

Until ordinary consumers feel willing to spend, or take on new debt, then banks will find creative ways of divesting them of their money. Come budget day, Mr Donohoe might do likewise, by slapping a higher DIRT tax on them too.