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Magazine Issues » November 2020

Opinion: When banks were banks

Fiona_RintoulOn October 31, it was World Savings Day – or World Thrift Day as it used to be known. This was established in 1924 to inform people about the idea of saving their money in a bank rather than keeping it under the mattress. With interest rates bumping on the ground or dipping beneath ground and banks no longer held in the highest regard, it is a good moment to consider what the role of savings is – or should be – in our altered world. 

Speaking to me for a feature on the French market, Pascal Duval of Amundi said that banks don’t want the circa €90 billion that French savers have awarded them because it costs them to hold that money. Klaus Morgenstern of DWS made a related point in recent commentary on World Savings Day. 

“The good old savings book, the icon of World Savings Day, has experienced an unexpected revaluation in times of increasingly widespread negative interest rates,” he said. “Banks are not allowed to charge negative interest on savings books.”

It is a sorry day when an investment is only highlighted because it does not lead to losses, as Morgenstern notes. It is an even sorrier day when banks don’t want your money. I recently had to jump through an extraordinary series of hoops to open a savings account that will pay 1.05% interest. When the documents finally arrived and I tried to log on, I discovered the password I’d been sent didn’t work. It felt deliberate. 

I persevered because the account was for money I’m looking after. I don’t want to lose it and I was brought up not to take risks with that kind of money. But, I know that I am effectively losing money in that hard-to-open excuse for a savings account. 

So, what is the answer? As the compound interest effect and long-term capital accumulation through interest-bearing savings that was the driving force behind the will to save is no longer conceivable in the long term, Morgenstern suggests World Savings Day should be renamed. His suggestion is World Savings Plan Day. Specifically, he highlights the virtues of savings plans based around a multi-asset funds, which are a kind of double-pronged way to smooth the ups and downs inevitably associated with any kind of investment. 

This all makes sense, but will it allay the concerns of small private savers? I’m not sure it will. 

Perhaps we should instead return to the concept of World Thrift Day. That name suggests something beyond monetary savings – a make-do-and-mend approach that is very needed in an overpopulated world infested with our plastics and pollution. 

Or perhaps banks need to change. On its website, the World Savings and Retail Banking Institute says that World Savings Day places added focus on the stabilising role played by savings and retail banking in the overall financial system. “It evokes some of the ethos of local banks: responsible partners in communities, close to the customer, serving households, small and medium-sized firms (SMEs) and local authorities. WSBI member banks demonstrate their locally focused approach to banking through World Savings Day activities in the communities they serve.”

This does not call to mind my box-ticking bank, which is part of a massive global corporation. It probably provides a good service to other global corporations, but it is estranged from its smaller customers, and a local businessman once told me that it did not “deserve” his custom. So, perhaps World Savings Day can stay as it is – and local banks can go back to being local banks. Otherwise, there’s always the mattress.

Fiona Rintoul, editor-at-large at Funds Europe

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