Paul de Grauwe: "Banks are getting rich while they sleep and exploit customers, ECB has to adjust rules"

In this episode, Paul Buitink talks to Paul de Grauwe, professor at the London School of Economics. The reason for the conversation is the sky-high profits that the European major banks have been able to record in the first half of 2023.

The profits have risen because the banks receive an interest rate on the deposits (reserves) they hold with the central bank. This interest rate has now risen to 3.75%. Bank-savers do not see this reflected in higher savings rates because large banks have a lot of power and there is little competition. Paul de Grauwe indicates that banks exploit their customers in this way and become rich while sleeping.

He argues for limiting the interest rates that major banks receive. He believes that these profits belong to the central banks and therefore to the taxpayer. Finally, the fragility of the euro is also discussed. According to De Grauwe, the vulnerability of the euro stems from the fact that national governments issue debt securities in euros, but have no direct control over the issuance of the euro itself. At the moment, he does not see a solution for this. The cultural differences are too great for a political union.