The cheap money of the EB does not arrive at private households: Banks have lowered the lending rates in the past much more strongly than the interest rates for investments in call money and time deposit. The institutes were able to expand their profit margins and thereby partially stifle the stimulation effects hoped for by monetary policy.
The imbalance is obvious: One of the largest credit card banks in Germany charges its customers an effective interest rate of 18.49 percent for partial payments. If the same credit card account is credited, the latter earns just 0.75 percent pa: The bank collects a profit margin of 1774 basis points or more than 2400 percent.
High interest rates on scheduling loans and installments
Part-payment credit cards are not widely used in Germany and therefore play hardly any role in macroeconomic aspects of monetary policy. The situation is quite different with discretionary loans: millions of households use their bank’s credit line regularly and feel the lending rates in the budget. Falling disbursements would therefore at least measurably increase the disposable income of millions of households.
But the cheap money from the EB is not even on the current accounts of consumers. FMH AskMeFinance, which claims to be independent, estimates the average interest rate for account overdrafts at 10.45 percent. This is almost 21 times (!) As much as banks have to pay for short-term liquidity from the EB. The profit margin of more than 2,000 per cent on average prevents relief for indebted households and thus an important lever of monetary policy in relation to private consumption.
“Dicke Bertha” aims at installment loans
One of the most spectacular measures of the EB in the fight against the financial, economic, sovereign debt and usd crisis was the “fat Bertha”. Through the long-term refinancing instrument, the central bank provided commercial banks with a total of around $ 1,000 billion in liquidity for three years in December 2011 and February 2012. Fired as artillery, the “fat Bertha” reached the private customer business at best as a New Year’s Eve cracker.
In the spring of 2012, FMH loan syndicate banks demanded an average of 6.82 percent in interest rates. Currently, the average interest rate of 5.90 percent is not even 100 basis points, although banks can refinance loans extremely cheaply and swim through the thick Bertha in Liquiditt.
Sales maximum reached?
In terms of refinancing costs, banks thus still have considerable leeway. Economically, these could be used to maximize profits if a lower margin is accepted in favor of more sold loans. An important indicator for monetary policy is that this is not done, or at least on a very modest scale. Apparently, falling interest rates are not leading to significantly rising demand for loans from private households beyond the current level.
Credit market is growing slowly
This is also confirmed by the latest credit bureau credit compass, according to which the number of newly taken up loans and the sum of current obligations rose by only 6-7 per cent. It has to be taken into account that the credit periods are on average lower. Many of the newly acquired loans may have been used for rescheduling because interest rates are generally more favorable than in the past. The remaining growth in the credit market seems superfluous against the background of a stable labor market situation and the massive application of partial payments in the retail sector.
Monetary policy remains loose
The benefits of an expansionary monetary policy for the economy are controversial: in Japan, low interest rates could not end two decades of deflation. In the US, a rethinking of the central bank seems to be coming to an end. usdpe is still a long way from this: EB President Mario Draghi announced on Thursday that he wanted to further lower the key rate if necessary and, moreover, keep it low for a longer period of time.