Tuesday, 7 June 2011

Citigroup are winging about NS&I certificates

It had to happen. The banks have started to get huffy about the government offering savers a better deal than the banks are prepared to.
The certificates are a "bad idea", [says Citibank], and are likely to be an "expensive" form of funding for the Government given that they have a higher yield than gilts and the interest is tax-free. Citigroup analysts criticised the Government's expansion of National Savings and Investments (NS&I) and said that it should instead be looking to reduce the size of the scheme and raise funds through the sale of gilts.

"While the new national savings index-linked certificates appear highly popular with many investors, we believe they are a bad idea for the government: they are likely to prove a highly expensive form of funding and will hinder the important task of reducing the UK banking sector's reliance on wholesale funding," said Citigroup.
Well this blog says the banks had better start offering a better deal if they want our money on deposit. And to improve on RPI+0.5% tax-free for a 40% tax-payer that means a deposit rate of about 10%, so I don't think we'll be seeing that any day soon.

There are about £1 trillion on deposit in British banks so the £2 billion that NS&I are planning to take is really small fry. But the banks seem to resent every penny they don't get.

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