Question about Banking morals

[Ken07AOVette]

A (BIG) local bank is offering $1,000,000.00 as a 'raffle'.
The rules are; for every $500 you put into savings and leave there until May 1, you get 1 entry for the $1mil.
Is this the bank trying to guarantee they can get their hands on a hell of a lot of money in a very short time?
They do the petty little cashback every year, but this seems incredibly suspicious.

Gift horse or rigged and collusion just to get secured investment funds?

[bat119]

Do you have a link?

[Drewski Canuck]

Ken,

Banks must show a level of deposits on hand for money that they take from the Bank of Canada. Obviously, if their deposit amounts are too low, they cannot access Capital from the Bank of Canada.

This is a method to ensure that Banks offer banking services and interest to Private Citizens. Nothing more or less.

These ratios are critical in Canada as deposits vs. loans vs. Bank of Canada Borrowing is tied together.

In some countries, a Bank can loan a limitless amount and borrow a limitless amount from the Central Bank. Think of it as "printing money without having paper money".

Canada has a very strong banking system. That is proven from the 2009 meltdown in many other Countries.

Drewski

[Ken07AOVette]

I was thinking I would pull out a couple hundred grand from my line of credit, worst it would cost me is the interest for 4 months.

Then I saw the maximum you can put in, is $10,000,000.00.

$200g won't even be seen. They are likely hoping people are going to get huge loans, and do exactly that, then they take advantage of the interest plus the money in the savings accounts.

​​​​​​​Brilliant, actually.

[Talking moose]

Win. Win. They get a ton of investments and people get a shot at winning a cool mil. Great idea. Maybe buy some shares in the bank now before people throw money at it.

[fishtank]

i get 2 chance of a million$ dollar when i put $1 in western 649

[zewks]

https://www.servus.ca/news/news-and-.../the-big-share

[Jayhad]

corporations by the nature of them not being a person can not display morals. there is one goal, money in the pockets of share holders, if you believe any different you are naive

[Grizzly Adams]

Servus is a Credit Union, not a bank, that's their members money they're giving away. Gotta wonder what the board of directors is thinking ?

Grizz

[tool]

Originally Posted by Ken07AOVette

I was thinking I would pull out a couple hundred grand from my line of credit, worst it would cost me is the interest for 4 months.

Then I saw the maximum you can put in, is $10,000,000.00.

$200g won't even be seen. They are likely hoping people are going to get huge loans, and do exactly that, then they take advantage of the interest plus the money in the savings accounts.

​​​​​​​Brilliant, actually.

How much interest would they pay you on the deposit to this savings account Ken?

I don't know what your bank rates are but by my simple rough math, $200,000 at 5%/annum x roughly 1/3 annum would be like $3,300 right?

That's a lot of interest to pay needlessly. but if you have a low rate line of credit and the savings account pays back a reasonable interest rate it might not be so costly ( but what savings accounts pay much interest anymore?? )

You'd have to weigh the cost out, it might be a pretty exspensive raffle ticket.

But if you win the million I can help you find ways to spend it!

[JD848]

Maybe there trying to get investors to open saving accounts from other countries to open accounts in Canada since so many are just taking there cash somewhere else.10,000,000.00 should get you entry into the country with papers real fast.

[jstubbs]

Originally Posted by Grizzly Adams

Servus is a Credit Union, not a bank, that's their members money they're giving away. Gotta wonder what the board of directors is thinking ?

Grizz

Are you kidding? This is brilliant. Credit unions makes a spread (probably 3% or more) on deposited money. Of course, they would need roughly $35,000,000 in deposists to make back the million given away, but that’s not the whole piece of this. They entice a ton of new members to the union, which creates more revenue. And it generates free natural advertising from posts like these, which they’re otherwise spending hundreds of thousands to probably somewhere in the millions on anyway.

[qwert]

Originally Posted by Drewski Canuck

Ken,

Banks must show a level of deposits on hand for money that they take from the Bank of Canada. Obviously, if their deposit amounts are too low, they cannot access Capital from the Bank of Canada.

This is a method to ensure that Banks offer banking services and interest to Private Citizens. Nothing more or less.

These ratios are critical in Canada as deposits vs. loans vs. Bank of Canada Borrowing is tied together.

In some countries, a Bank can loan a limitless amount and borrow a limitless amount from the Central Bank. Think of it as "printing money without having paper money".

Canada has a very strong banking system. That is proven from the 2009 meltdown in many other Countries.

Drewski

I respectfully submit that you are mistaken.

Good Luck, YMMV.

[huntinstuff]

Originally Posted by Ken07AOVette

I was thinking I would pull out a couple hundred grand from my line of credit, worst it would cost me is the interest for 4 months.
.

Wish I had know that in 2009.

[Sneeze]

Originally Posted by Drewski Canuck

Ken,

Banks must show a level of deposits on hand for money that they take from the Bank of Canada. Obviously, if their deposit amounts are too low, they cannot access Capital from the Bank of Canada.

This is a method to ensure that Banks offer banking services and interest to Private Citizens. Nothing more or less.

These ratios are critical in Canada as deposits vs. loans vs. Bank of Canada Borrowing is tied together.

In some countries, a Bank can loan a limitless amount and borrow a limitless amount from the Central Bank. Think of it as "printing money without having paper money".

Canada has a very strong banking system. That is proven from the 2009 meltdown in many other Countries.

Drewski

I'm pretty sure this is incorrect. Banks in Canada do not have a reserve requirement and do not borrow from the boc to issue consumer or business loans. The BOC sets base rate as well as purchases federal debt. Our banks create money out of thin air when loaning money.

[Purple Farmer]

Ken, I can't believe you mentioned banking and Morals in the same sentence

Many banks are facing a huge liquidity issue (see Drewski's post) they are going to fight for deposits as they need huge amounts of cash in a real hurry.....

As for how they achieve their liquidity funding ... https://www.bankofcanada.ca/wp-conte...ng17-truno.pdf

[Whipper Billy]

Originally Posted by Sneeze

I'm pretty sure this is incorrect. Banks in Canada do not have a reserve requirement and do not borrow from the boc to issue consumer or business loans. The BOC sets base rate as well as purchases federal debt. Our banks create money out of thin air when loaning money.

No reserve requirement
https://gilliganscorner.wordpress.co...-requirements/

Canada - Bank liquid reserves to bank assets ratio
Bank liquid reserves to bank assets ratio (%) in Canada was reported at 0.22961 % in 2008, according to the World Bank collection of development indicators, compiled from officially recognized sources.

Looking at this chart we appear to be the lowest in 2017
https://data.worldbank.org/indicator....ZS?view=chart

[Ken07AOVette]

the fine print

6. Selected Entrant Verification and Prize Claim Conditions
The selected Entrant will be contacted by telephone within five (5) business days of the draw. In order to be eligible to win, the selected Entrant must: (i) respond to notification of selection within three (3) days of the first attempt to contact; (ii) correctly answer a time-limited mathematical skill testing question to be administered by telephone at a mutually convenient time within five (5) business days of first notification; (iii) sign and return to Sponsor, within five (5) calendar days of it being sent by Sponsor, a written declaration and release form, releasing the Sponsor, its employees, officers, directors, and promotional partners, from any liability in connection with this Contest or the use, misuse, awarding or possession of any prize (the “Release”); and, (iv) otherwise comply with these Official Rules. As part of complying with these Official Rules, the selected entrant must become a Member if such Entrant is not already a Member.

[Drewski Canuck]

Reserves by way of cash on hand in a vault is not the deposits held that I am talking about.


Most bank branches have less than $20,000 cash on hand at any one time. Their deposits are vastly greater.

But for borrowing from BOC, which banks do, there is a deposit measure as well as liquidity measures. These may be simply numbers on paper, but it is there.

The whole system of deposit insurance is essentially backed through a Crown Corp, and the system has alot of checks and balances all set out to protect the viability of the financial system.

In any event, why a Bank would offer such a prize, to lure accounts over, is obvious that the Bank wants to grow its business of consumer / borrowers / investors.

https://medium.com/coinmonks/canadia...o-6c69e2c3d8f5

The Fractional Reserve Banking Model

Suppose someone deposits $100 cash into their bank account. According to the fractional reserve model, the bank can now lend out a certain fraction of that $100 and must keep the rest of it on reserve. The amount kept on reserve is determined by the reserve ratio, which for this example I’ll follow the standard macro textbook and say that it is 10%. That means the bank can lend out 90%, or $90, and must keep 10%, or $10, on reserve. What is important here is the assumption that the initial $100 deposit was first needed in order for the bank to make the loan — deposits create loans.

This $90 that the bank loans to someone else is now considered to be the new money created, because the first person who deposited $100 at the bank still has their $100 while the person who is borrowing the money now has $90. In total $190, which came from an initial $100. If this borrower takes the money and then deposits it into their bank account, the whole process can be repeated with a new borrower. This time $9 will be kept on reserve and only $81 can be loaned out.

As you can see, each time this process is repeated, the amount that can be loaned out becomes smaller and smaller. The total amount of new money that can be created from the initial $100 can be found using the inverse of the reserve ratio, (1/0.1), also known as the money multiplier. Multiplying the initial $100 by the multiplier and then subtracting that same initial amount will give you the total amount of new money created from that initial deposit.


That’s it, $900 of new money, no more, no less. If banks want to loan out more money they either need to attract new deposits or wait for the central bank to provide them with more reserves. Banks can create a limited amount of new money, but being constrained by the reserve ratio, it is ultimately the central bank that controls the money supply through its increase or decrease of bank reserves. That’s the fractional reserve banking model, which you can find in most standard macroeconomic textbooks. But that’s not how the banking system actually functions.

Drewski

[barsik]

something about this smells. ATB is offering a high interest rate on a minimum 5000.00 deposit into a savings account until April. how many other banks are offering some kind of incentive to deposit money into a savings or long term account and why?

[shunda2]

Read what this man says, then read it again. Pay attention to any thing
he has to contribute.!!!!

[jstubbs]

Originally Posted by barsik

something about this smells. ATB is offering a high interest rate on a minimum 5000.00 deposit into a savings account until April. how many other banks are offering some kind of incentive to deposit money into a savings or long term account and why?

Scotia has an up to 3.2% I believe on first time deposits in a new account for 1 year deposits .

[Sneeze]

Originally Posted by Drewski Canuck

Reserves by way of cash on hand in a vault is not the deposits held that I am talking about.


The Fractional Reserve Banking Model

Drewski

I'm sorry Drew but this is wrong. Canadain banks and our money system do not operate on a fractional reserve model.

Not sure why it's such a mystery why banks would offer big incentives to switch. Accounts can be 20-30 a month. Plus they usually will then get first crack at your mortgage, credit cards, heloc, unsecured credit line, and maybe insurance. Plus having some liquidity to back up the prop desk is never a bad thing.

[Bush Critter]

Ethics and Banks... they are in business to make money. If the bank makes a bo boo and loses your money and you call them on it they say it was an honest sincere mistake. On the other hand if you take money from a bank they call that fraud, if you steal money from a bank it’s called bank robbery and these crimes are heavily enforced.

You probably have a better chance of winning 6/49 than any bank raffle...

[Dean2]

Drewski's explanation is close. In the large Canadian bank's, if they run short of reserves they can borrow them in the interbank market at CIDOR (Canadian Interbank Overnight Rate). If there are not sufficient interbank funds available to fund all Bank's demands combined, they can get the reserves on demand from the Bank of Canada. Thus, a reserve requirement does not constrain their ability to lend, it just affects the spread they earn being that their own deposits are at a lower rate than they pay in the interbank market or to the B of C. (Interbank and B of C are usually at close to the same rate).

With Credit Unions, they cannot borrow from the Bank of Canada. They must raise all the funds they need in the interbank market. There are times when the supply of Interbank funds gets tight, driving up the rates. Whether rates are up or at/close to B of C equivalent this is much more expensive than their own deposits. Thus they have a strong preference for acquiring deposits of their own, thereby increasing the spread on their loans (the difference between what they pay for deposits versus what they earn on loans). If they can increase the spread on a loan from 1% to 2% many would consider that not very material but it represents a 100% increase in profitability.

Today the B of C rate is 1.75%, interbank rate, CIDOR, is 2.25, for a difference of 1/2 a percent. Compared to what most banks are paying on deposits, in the absence of these short term specials, chequeing accounts earns zero, savings earn 1/2 to 1 %. That is a minimum of a 1.25% difference to the Interbank rate for the Credit union. If the credit Union can attract $100,000,000 in new deposits, which is actually easier than it seems, by paying a higher rate temporarily, they are well incented to do so.

Technically Canadian Banks and Credit Unions do not have a
"Reserve" requirement, though they cannot operate with negative reserves, and in most developed countries those that have reserve requirements are under 2%. Canada has capital adequacy regulations but that is a far more complicated discussion that I don't feel like trying to type out so it is clearly explained. For the purposes of this thread, the reserve/deposit explanation is sufficient to explain why the Credit Union is doing what they are.