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Banks are burdened by a high influx of deposits

D.t European banks are pouring in more deposits than ever before in the corona crisis. From the beginning of the year to the end of September, savers deposited a total of 400 billion euros more than withdrawn into bank accounts in the euro area, as Deposit Solutions reported on Friday. The platform, which specializes in brokering savings deposits, analyzed data from the European Central Bank (ECB). Accordingly, the increase in deposits in the first nine months is already above the value of 396 billion euros in the entire previous year.

The banks ‘higher deposits are due to savers’ need to play it safe in times of pandemic. In addition, with its bond purchases and extremely cheap financing deals, the ECB is helping to ensure that more liquidity is in circulation. This is parked at the banks. For the institutions, higher deposits mean an increasing burden due to the negative interest rates of the ECB. Because it charges a negative interest rate of minus 0.5 percent for the deposits of the commercial banks. According to calculations by the Association of German Banks, European banks will have to pay around 10 billion euros in negative interest to the ECB this year. In the previous year it was 7 billion euros.

Higher bank levy

In addition, the influx of deposits is also ensuring higher contributions to the resolution funds of European banks. By the end of 2023, this should originally have a target volume of 55 billion euros, which should correspond to 1 percent of the covered deposits, i.e. all accounts up to the state guarantee of 100,000 euros per customer and bank. But the target amount has increased by 30 percent to 70 billion euros due to the inflow of deposits. This increases the bank levy sharply – this year to 9.2 billion euros after 6.4 billion euros four years ago.

German banks are particularly affected, with more than a third of the inflow of deposits in their accounts. According to Deposit Solutions, most of the money flowed into German accounts in the third quarter, at around 29 billion euros. This corresponds to 36 percent of the total net deposits in the euro zone. It was followed by France with around 24 billion euros (29 percent) and Italy with around 15 billion euros (19 percent). The volume of deposits in these three countries is growing at a disproportionately high rate. They represented 65 percent of the eurozone deposit market but were responsible for 83 percent of this year’s net deposits, Deposit Solutions reported.

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