Banks do not have incentives to increase interest on deposits with low credit

Banks have been able to gain from the European Central Bank’s (ECB) deposit rates, which are currently at 3.25%, and compensate depositors with much lower values, averaging 1.03% in April. A big difference in a sector that does not need to pay more to attract orders, because it has excess liquidity compared to the credit it gives. Bank managers refused that increasing interest on deposits be a social responsibility; On the contrary, they argued, they needed to stabilize the profitability of shareholders, who had not seen their capital get adequate wages for over a decade.

As the European Central Bank’s interest rates rise (the main rate at 3.75%), the demand for credit has decreased, as it has become more expensive: for example, the interest rate on new home loans was at 3.98% in April. And with a shrinking loan portfolio, there is no need to collect additional deposits.

This is an article from Expresso Weekly. click here To continue reading.