BRITISH INTEREST RATES

Evening Star, Issue 25619, 20 October 1945, Page 9

BRITISH INTEREST RATES

DRASTIC OUT OPERATIVE LONDON, October 18. The Government has decided drastically to cut the interest it will pay on its short-term borrowings, which will entail a heavy reduction in the banks' interest receipts, says the Press Association. Bankers, consequently, have decided to cut their gross expenditure, and announced that no interest will in future be paid on current accounts. The maximum interest on deposits will be i percent per annum, and existing contracts for a higher rate will be terminated.

The Exchange Telegraph's city editor states that the Treasury has decided to reduce /the rate of interest on Treasury deposit receipts (which represented over 40 per cent, of clearing bank assets against their total deposits of £4,898,000,000 in September) from 1-J per cent, to | per cent, from October 22. Clearing banks consequently will have to reduce their buying rate for Treasury Bills (they do not take them up direct), and their rate for day-to-day loans to the money market against Treasury Bills from that date from 1 per cent to J per cent, for the time being. The gross earnings of the clearing banks by way of interest receipts will thus be drastically reduced and will necessitate corresponding reductions in their gross expenditure by the way of interest pa3'ments on current and deposit accounts. They, therefore, have decided to abolish the .payment of interest on current a counts (mainly paid on the larger traders' accounts), while deposit account* will not bear interest for periods tinder 14 days, instead of seven days. The interest payable by banks on deposits left for fixed periods of 14 days or more will be reduced from I per cent, to J per cent. No change will be made in the existing interest rate allowed on small savings accounts.