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What's in it for the banks?
May 30, 2009
4:35 pm
asp
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I am wondering why banks offer High Interest accounts when they can borrow all the cash they need from the central bank at lower interest?

Anyone here have some inside information on how the banks justify borrowing our money at higher rates then they can get otherwise? I can understand them paying more for a GIC or Term Deposit, but for a regular savings account that can be emptied at any time?

May 31, 2009
7:48 am
jeremywong
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I don't have insider information, but I guess there must be a limit to borrowing from the BoC. Maybe the amount of money that can be borrowed from BoC is based on deposits, so the way to borrow more from BoC is to get more deposits. The BoC would have a reason for such a policy---loans from BoC are money-creation and therefore inflationary. So to control inflation, it would limit money-creation (loans) based on real money supply (deposits).

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