Somebody's been onto Robert Peston's website.

But yes that's exactly what I was getting at when I said that the banks can't borrow at the BoE base rate.

Thanks - you put it much more clearly than I did.

(edit) By the way - I voted for the middle option in the poll!

There appears to be a complete lack of understanding of how banks raise finance in the media.

The bank of England rate is for banks borrowing overnight - it is not reflective of fixed borrowing over any considerable term. Therefore its not practical for the banks to reflect this rate en masse. The actual cost of longer term borrowing (via interest paid to us in deposit accounts or on the wholesale market) is much higher and doesn’t track to the Bank of England rate.

So is it realistic that we expect banks to reduce prices, when their cost of borrowing in real terms is almost unchanged?

The importance of this via media and government spin also intrigues me. The calls for changes to variable standard rate mortgages account for only 10% of the market - so it’s hardly going to change the world.

Smala01

The profits were nothing compared to the liabilities and frankly I would think that a bear market, toxic debts, fat bonuses and last year's dividends long since accounted for them.

Nobody will argue that the banks are not to blame, but that isn't the question.

When the ship is sinking, do you argue about who used up the supplies or do you take the action necessary to keep the ship afloat?

Community:

Interest rates have fallen 2% since September yet many mortgage lenders have not passed on the rate cuts to borrowers. Savings rates on the other hand are being reduced thick and fast. The Government is piling on the pressure for lenders to pass on the latest cut but analysts are warning that many institutions will take the opportunity to short change customers and boost their profit margin. Do you think banks are ripping off consumers?

I should also add. I don't work for a bank.

I do work in financial services, but I work for a company that gives sensible financial advice and a large part of my role is to ensure that our company does the right thing, so there is no conflict of interest here.

I totally agree.

Yes, The banks have been extremeley irresponsible and to to a large extent governence as well.

However those that have over borrowed money on credit cards or taken out 100% mortgages must also share in the blame.

There have been plenty of warnings over the last couple of years that all was not well in terms of borrowings and and overvalued property markets

I think this is slightly mad.

Why are banks in the position that they are (basically struggling to stay solvent)?

Because they've taken on debts that are too risky for the amount of money they make from them.

The money they make is the difference between the cost of their borrowing and the price they lend to you at. This money needs to cover the proportion of bad debts before they make a penny.

This is why people who are percieved as a poor risk must pay more interest.

Also, the BoE base rate cut is simply the base rate cut. The banks actually can't borrow long term at that rate.

So let's think about this rationally - we've got a banking industry that is in crisis and the key banks have all been propped up with public funds (yes, even Barclays it's just they took the "public" funds from one of the Gulf nations rather than the UK).

They are all losing a colossal amount on loans they have made.

And we are universally criticising them for being so stupid.

And then we sit back and vote here to say that they're bad for not passing on the full rate cut?

This is ridiculous.

Yes the banks have been colossally stupid, but we have been too and we should not expect to see more than maybe half of any rate cut.

Interest rates have fallen 2% since September yet many mortgage lenders have not passed on the rate cuts to borrowers. Savings rates on the other hand are being reduced thick and fast. The Government is piling on the pressure for lenders to pass on the latest cut but analysts are warning that many institutions will take the opportunity to short change customers and boost their profit margin. Do you think banks are ripping off consumers?