Do 'Household' Banks Speculate?

[dwaddell]

Hi,

A question for you all that got me and a mate into an argument over dinner one night.

Do the 'household' banks, i.e. the HBOS, RBS, Clydesdale, Natwest, TSB etc speculate?

Any markets, FX, Futures etc...do they take our savings and speculate to accumulate or do they leave well alone and make their money on lending interest etc. Is this purely the domain of merchant banks and investment funds?

I'll exclude from this "investment products" that banks may sell to customers.

I was always under the impression that banks made (some of) their money be re-investing ours...?

Sorry if this is a stupid or odd question.

Dave

 

[theknifemac]

Do the 'household' banks, i.e. the HBOS, RBS, Clydesdale, Natwest, TSB etc speculate?

Dave

Most definitely ! I used to work for Natwest Markets which was subsequently sold to Bankers Trust and RBS. RBS have a capital markets division which is strong in rates and fixed income markets. Abbey National have a large treasuries division. The others will be similar tho possibly on a smaller scale.

HTH

Stew

 

[dwaddell]

Thanks,

Is that investing with:

1. the banks profits
2. customers who have put money into an investment product
3. my savings

This friend of mine works with Bank Of Scotland (HBOS now I think) here in Edinburgh and swears blind that they dont muck about with customers money...I thought otherwise.

Forgive my perhaps naive view here...

Dave

 

[theknifemac]

Thanks,

Is that investing with:

1. the banks profits
2. customers who have put money into an investment product
3. my savings

Dave

Not sure. Retail banks make money on the spread between bank account rates and lending rates. They are playing with their own profits rather than customer money as such I would have thought.

Stew

 

[A Dashing Blade]

Money that you have deposited with them will be lent out (many times over) to borrowers

Money customers have used to buy financial products will have been used to do just that as those things tend to be made up of a bundle of OTC instruments. Eg these "money back or X% of the markets gain over 5 years" poroducts are a combination of zero-coupon bonds and out-of-the-money calls.

Their trading capital would, ultimately I guess, have come from historic profits.