Raisin's Interest Rate Tracker

What is the Raisin Interest Rate Tracker?

Raisin regularly analyses retail and corporate interest rates from banks across the European Economic Area (EEA) as well as the data of the European Central Bank (ECB). In the Interest Rate Tracker you will find a comparison of each market’s top available interest rates with the rates at their respective largest banks; the spread between top 1- and 3-year rates; and a comment on the latest ECB data for retail and corporate interest rates across Europe. The newest edition is below.

Euro Zone = Zero Zone? Depositors at biggest banks earn near 0% in almost all of Europe

Scandinavian countries offer the highest interest rates on the continent

As interest rates for savers at Europe’s largest banks sank further or stayed at rock bottom, the highest available interest rates contrasted more starkly, from four times higher in France to more than 200 times higher in Germany. Consumers in all four of the Eurozone’s richest countries, currently in possession of 6.323 trillion euros in deposits, can secure a yield on their money if they choose to.

Germany, France, and Italy all saw their best interest rates buck the downward trend, at least for this month. As interest rates at the biggest banks of those three countries stayed low or dropped even further, the rate spreads widened – increasing opportunity for depositors in three of Europe’s largest economies.

Although Spain’s top interest rates slipped fractionally, the gaping spread between the largest banks at 0% and best rates at 0.733% puts Spanish banking customers in the same boat.

  • The largest banks across Europe feature rates on average between 0% and  0.13% – except in the UK (0.183%) and Norway (0.483%).
  • The interest rate spread narrowed in Spain, Portugal, Austria, and Poland, as well as in the UK and Norway.
  • Only in Germany did the spread increase this month with German big bank rates falling yet further and top offer rising.
  • Sweden and Norway have the highest top interest rates in Europe, while Ireland has the lowest (though only by excluding the Raisin Ireland marketplace, products from which bring Ireland up next to Spain and Portugal).
  • The UK and Austria saw rates go down all around, both top offers and big banks.

Top 1-year versus top 3-year deposit rates in European countries

In most of Europe the top available 3-year interest rates fell. Investors may be uneasy about the potential for economic recovery following the pandemic. This could also indicate a lack of appetite on the part of banks for longer-term cash as so many of them are facing over-liquidity following the 2020 savings surge. Only in Germany did the top available interest rates rise on 1- and 3-year term deposits.

  • The best interest rates on 3-year terms fell in France, Italy and Sweden, despite 1-year rates rising in those markets.
  • 3-year rates also fell, together with 1-year rates, in Austria, Spain, Poland, the UK and Norway.
  • Spain continues to have higher top rates on 1-year term deposits than 3-year.
  • Italy and Sweden feature the highest 3-year interest rates in Europe, with Poland and Norway not far behind.
  • Italy also has the widest spread between 1-year and 3-year rates.

ECB DATA: Retail Interest Rates

The European Central Bank’s latest data shows little to no change across most of the continent. Eighteen of the 28 European countries, including Germany, the UK, and France, saw shifts in their average retail interest rates of 3 basis points or fewer – in fact, most at 1 or 0 basis points of change.

Of the six nations with stand-out rate changes, even large increases of 10 to 30 basis points (in Spain and Denmark) resulted in average rates of just 0.11%. Meanwhile, several markets with relatively higher rates saw drops, meaning the average spread across Europe contracted.

Retail Rates

Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

 

  • The biggest interest rate decreases came in Italy, Latvia, and Slovakia, where rates have been relatively high.
  • Spain, Belgium, and Denmark all saw significant increases, though their rates only made it as high as 0.11% (Spain and Denmark) and 0.28% (Belgium).
  • 12 countries saw no change at all, on average, or just 1 basis point up or down.
  • A glance at the difference between November 2020 averages and November 2019 shows nonetheless how volatile the year was (see the two right-hand columns).

ECB DATA: Corporate interest rates

With only slight changes from last month’s ECB data, businesses in nine European nations are still paying negative interest on average for their deposits, totalling 3.11 trillion euros in the Eurozone as of November 2020.

These continue to include much of Western Europe – Germany, Austria, Spain, the Benelux countries, and Ireland – with France (0.01%) and the UK (0.07%) sinking ever closer to 0% to join them.

Corporate rates

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

 

  • Germany dropped a fraction of a percent further, pushing the lowest average corporate interest rate in Europe down to -0.37%.
  • Belgium and Ireland also crept lower, not far behind Germany at -0.30% and -0.23% respectively.
  • Businesses in Spain saw a significant jump in interest rates but still leaving their average under 0% at -0.17%.

Comment

Raisin Head of Business Clients Lisa Schmid explains the impact of negative interest rates on German small and medium-sized enterprises (SMEs):

“In June 2014, the ECB’s interest rate for the deposit facility fell into negative territory, to -0.1%, for the first time. What appeared to be a short-term measure at the time has long since become the norm. Depositors, both private investors and companies, are looking for ways to escape negative interest rates on deposits. How are SMEs, which account for 99.6% of companies in Germany, responding to this rate environment?

While in June 2017 only one in five companies stated that they paid negative interest, when asked by ifo (in their survey, “Economic survey on negative interest on deposits”), the option of evading deposit fees hardly exists today at all. With the widespread introduction of negative interest rates, negotiating exemption limits or switching banks usually brings only short-term relief.

The tendency toward predominantly liquidity- and security-oriented investing (86% of the companies surveyed, according to an October 2019 Commerzbank market study, in cooperation with forsa) has pushed companies to rethink their strategies. When it comes to term deposits, one of the most popular forms of investment, there are few opportunities to be found in the short-term at zero, much less with positive conditions. (This is exactly the gap in the market that Raisin’s platform for business customers fills, with, for example, overnight deposits at 0.16%).

The German average for deposits with a term of up to one year – the lowest in Europe – has been at -0.37% p.a. since November 2020. As the ECB’s data reveals, much of Europe is not far behind. Many companies are thus choosing the path of increasing investment in their own operations. Other solutions include investments in bonds, funds, shares, foreign currency investments, or certificates.

On the other hand, there are profiteers from negative rates, including companies for whom extremely favorable sources of borrowed capital are opening up. Favorable conditions in the area of financing are used to make promising investments.”

Sources

Raisin, ECB

Austria: Erste Bank, Raiffeisenlandesbank Oberösterreich, Bawag – biallo.at

Belgium: ING Belgium, KBC, Belfius Bank – spaargids.be

France: BNP Paribas, Credit Mutuel, Societe Generale – francetransactions

Germany: Deutsche Bank, Commerzbank, HypoVereinsbank – biallo.de

Ireland: Bank of Ireland, Allied Irish Banks, Ulster Bank – ccpc.ie

Italy: UniCredit, Banca Monte dei Paschi di Siena, Mediobanca – confrontaconti.it

Netherlands: RaboBank, ING, ABN – geld.nl, spaarrente.nl

Norway: DNB, Danske, Nordea – finansportalen.no

Poland: PKO Bank Polski, Bank Pekao, mBank – oprocentowanie.pl

Portugal: Novo Banco, BPI, BCP – comparaja.pt

Spain: Santander, BBVA, Caixabank – tucapital.es

Sweden: Nordea, SEB, Svenska Handelsbanken – finansportalen.se

United Kingdom: HSBC, Barclays, RBS – which.co.uk

European savers all dressed up with nowhere to go? Not exactly

Savings-rich Europe still has deposit options – at least for retail consumers

Overloaded with cash, particularly following the 2020 spike in savings volumes across the continent, big banks have kept interest rates low, now even negative for an increasing number of retail clients. In most of Europe’s largest economies, however, the top interest rates available to depositors are 0.5% to 1% higher than the best rates at those countries’ largest banks.

Top deposit rates versus big banks

Taking advantage of those spreads, consumers stand to earn an actual profit on their savings – especially considering inflation, which is near or below 0% in Europe’s biggest markets. Given the expectation that inflation ticks back up in the new year, with the arrival of the Covid vaccine, this could be true particularly on shorter fixed-term deposits.

Nonetheless not a single country of those we survey saw increases in retail interest rates in the last month. Small drops – a few hundredths of a percent, for the most part – occurred in the top interest rates across southern Europe and the UK. We registered similar decreases in rates at the biggest banks in just four markets.

*Creating a ratio between Spain’s big bank average of 0% and the top offers of 0.750% is mathematically impossible but 750 better captures the real situation.

  • Gap between top rates and big banks: Germany and the UK, along with Spain, Italy, and Portugal, plus Norway, all feature spreads of 0.5% to 1% between their best available interest rates on the one hand, and rates at their largest banks on the other.
  • France, Belgium, and the Netherlands, plus Austria, aren’t far behind with gaps of just under 0.5%.
  • The last month’s big exception was the UK, dropping several tenths of a percent and out of the 1% club, with UK top offers falling below 1% for the first time since the summer.
  • Top offers in Italy, Sweden, Norway, and Poland are still in those airy ranks above 1%.

Top 1-year versus top 3-year interest rates

As markets continue to absorb each new round of pandemic news and the resultant economic impact, 3-year term deposits are only trending 0.2% to 0.3% higher than terms of 1-year and under across most of Europe.

  • The few outliers who feature wider spreads between short and longer term deposits offer determined depositors strong options: UK 3-year top rates are just over 0.3% higher than its 1-year rates, and we see especially high 3-year rates available in France and Italy.
  • Top available interest rates slipped ever so slightly on term deposits of both 1-year and less, as mentioned above, and 3 years, in Germany, Italy, the UK, and Norway.
  • Spain, meanwhile, is still experiencing the inverse situation, with its average top 1-year interest rates higher than its 3-year rates.

ECB Data: Retail interest rates

According to the European Central Bank’s newest data, Italy’s interest rates jumped on average, together with rising rates in the UK, while Benelux rates were down across the board. Germany and Spain remained stuck in place – in a very low place – and Denmark crashed through 0% to become the first European country with a negative average retail rate.

Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

  • Italy and the Netherlands remain kings of the Euro-zone with the strongest average interest rates for their retail banking customers.
  • France and the UK continue to see competitive rates, particularly relative to their peer economies, Spain and Germany.
  • In smaller countries like Malta, Estonia, Slovakia, and Romania average rates are high enough to catch the outside investor’s eye.

ECB Data: Corporate interest rates

Aside from some signs of life in Eastern Europe, corporate interest rates on average continued their long downward slide, according to the European Central Bank’s new data from October 2020. Zero has provided no floor for business deposits, with nine markets paying negative rates on their cash and an average interest rate for corporates of -0.22% within the Euro area.

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

  • Major EU economies including Germany, Spain, the Netherlands, Belgium, and Austria all continue to see rates for corporates at well below 0%.
  • Industrial stronghold Germany is still at the bottom with -0.36% on average.
  • From Austria eastward, however, business interest rates ticked upward on average, even if that meant climbing up toward 0% for Austria and Bulgaria.
  • Even Italy lost ground, though at 0.54% it still remains the highest in the Euro-zone, aside from Malta.

Comment on consumers’ options from Katharina Lueth


Raisin VP for Europe Katharina Lueth oversees the expansion beyond Germany of Raisin’s deposits marketplace. She spoke to the current savings situation in Europe and what options consumers face:

“We’ve seen a surge in savings volume during the pandemic. People are putting away a significant portion of their money due to the increased uncertainty, as well as simply a lack of opportunity to spend. Since the extreme market volatility starting last March, there has also been an increased focus on low risk. People want to retain access to their money in the short term, in case they need it. This means the majority of money is kept in current accounts earning no return – or worse, paying negative interest rates.

When people put so much money aside, they should ideally ensure some return on it. Even in areas of low and negative rates, returns can still be found. At a minimum to protect their savings in the face of inflation, and where possible for a profit. Those concerned about the short term can look to 3-month or 6-month term deposit products.

For consumers that are taking advantage of the available options, it’s often part of a smart saving approach: putting money into a savings product is a way to “separate” money the saver doesn’t want to spend, and thus helps them stick to their budget.”

 

Sources

Raisin, ECB

Austria: Erste Bank, Raiffeisenlandesbank Oberösterreich, Bawag – biallo.at
Belgium: ING Belgium, KBC, Belfius Bank – spaargids.be
France: BNP Paribas, Credit Mutuel, Societe Generale – francetransactions
Germany: Deutsche Bank, Commerzbank, HypoVereinsbank – biallo.de
Ireland: Bank of Ireland, Allied Irish Banks, Ulster Bank – ccpc.ie
Italy: UniCredit, Banca Monte dei Paschi di Siena, Mediobanca – confrontaconti.it
Norway: DNB, Danske, Nordea – finansportalen.no
Poland: PKO Bank Polski, Bank Pekao, mBank – oprocentowanie.pl
Portugal: Novo Banco, BPI, BCP – comparaja.pt
Spain: Santander, BBVA, Caixabank – tucapital.es
Sweden: Nordea, SEB, Svenska Handelsbanken – finansportalen.se
United Kingdom: HSBC, Barclays, RBS – which.co.uk

 

Raisin press contact
Nicole Breforth
Head of Corporate Communications
press@raisin.com

European stagnation: Too much cash at the big banks keeps driving rates further down

  • Italy remains an outlier with some of the highest rates in Europe
  • European economies show no mercy for most depositors, despite tiptoeing back the last few months
  • Businesses in two of Europe’s four largest economies pay negative rates 

Raisin’s latest savings market analysis shows that, as the pandemic begins a second wave, interest rates have continued to fall. European countries feature significant spreads, however, between the interest rates at the biggest banks and the most competitive available deposits. Consumers in Europe can take advantage of the more profitable interest rates by looking countrywide or even across borders, particularly as inflation has fallen, but also compare between shorter and longer-term offers.

Following the analysis, Raisin VP for Business Clients and Partnerships Benedikt Voller explains the liquidity situation banks find themselves in and how it also impacts customers.

 

COMPARISONS: RETAIL INTEREST RATES ANALYSIS BY RAISIN

Top 3 banks versus top 3 offers in European countries

Poland, Sweden, Italy, and Norway feature the widest spreads between interest rates offered by their biggest banks and each market’s top available rates. Top 1-year rates ticked downward across western and southern Europe in the face of the pandemic’s second wave. The biggest banks’ held steady in nearly every country.

Even with most countries averaging best rates under 1%, those top yields remain multiples higher than the largest banks on average – 4 times higher in the UK, 8 times higher in Italy, up to 105 times higher in Germany and more than 800 times higher in Spain.

*Creating a ratio between Spain’s big bank average of 0% and the top offers of 0.817% is mathematically impossible but 817 better captures the real situation. These rates are calculated excluding Raisin’s platform and, where one exists, any direct competitor in each market.

  • Downward trend: From the UK to France, Spain, Portugal and Italy, and up to Norway, top interest rates on 1-year deposits slipped.
  • No change at big banks, except: Interest rates at the biggest banks in Belgium gained, while 1-year rates at Norway and Sweden’s biggest banks fell slightly.
  • Pennies add up: Changes in the last month were all marginal – usually a few hundredths of a percent. Yet the shifts are enough to earn or lose tens of millions in interest across the continent, given that in just Germany, France, Spain and Italy there are over 6 trillion euros in household deposits, according to the ECB.

 

Top 1-year versus top 3-year deposit rates in European countries

Amidst an overall flatlining, Germany, France, Belgium and Spain all hover in place or sink yet further. With two of the highest savings rates in Europe, Spain and Germany are stuck at the lower end for top rates – meaning a ton of money sitting in the bank not earning great returns. Ireland’s few banks, flush with cash, continue to feature the lowest interest in Europe, while Italy’s stressed economy keeps its rates competitive despite sliding slightly the last few months.

  • The economics of shorter and longer term rates are on display between the 0.17% spread in Germany – where there’s less risk but lower expectation for growth – and a 0.75% spread in Italy, with a higher risk factor but also a modicum of growth potential.
  • Still, central and southern Europe have options, with top rates from 0.57% to 1.85%.
  • Spain continues to experience an inversion with the highest available 1-year rates topping than 3-year rates.
  • The top rates in Norway continue a months-long downwards trend.

 

ECB DATA: RETAIL INTEREST RATES

The end of summer saw upticks in retail rates on average in most of Europe. Across the Euro area nearly every country is seeing lower interest rates, however, compared to fall 2019, from just a couple of basis points lower in Spain and Germany to -39 basis points in France.

The latest announcements from the European Central Bank point to rates undergoing further pressure downward in December and suggest that the ECB will proceed with some easing of its monetary policy stance. President Lagarde mentioned at her recent press conference that, “we have little doubt, given what is expected as a result of the risks that we are seeing, that circumstances will warrant the recalibration and the implementation of this recalibrated package.”


Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

  • Spain and Ireland’s average interest rate on term deposits 1-year or less are down to 0.01% and 0.02% respectively.
  • Of the largest five economies, average rates in Germany, the UK, and Spain all sank at the start of autumn, while France and Italy climbed to 0.56% and 0.64%.
  • Eastern and northern Europe saw gains, with rates in Denmark, Poland, Slovakia, Finland and Latvia all rising on average.

 

ECB DATA: CORPORATE INTEREST RATES

The magic numbers are 1, 2, and 3: half of the countries in our European Central Bank data went up or down 1, 2, or 3 basis points. But this also means businesses in nine European countries still pay negative interest on their deposits on average, and another nine countries earn less than 0.10%.

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

  • Austria and Estonia were the unfortunate outliers, with interest on corporate accounts there dropping -29 and -14 basis points.
  • Italy and Malta by contrast leapt 85 and 35 basis points, setting businesses there up to earn tidy little returns on their cash.
  • Corporates in Germany, Spain, and Ireland continue to face dismally low interest rates well below 0%, paying penalties, in effect, for any money in the bank.

 

Benedikt Voller

 

Raisin VP for Business Clients and Partnerships Benedikt Voller explains how banks are experiencing the current low rates as well as fiscal stresses caused by the Coronavirus pandemic:

“In the current environment of ongoing low and negative interest rates, European banks have received guidance from the ECB to keep economies across Europe afloat, accompanied by liquidity being pumped into the market via pandemic-related subsidies. As a result, however, many banks are facing an over-liquid situation on their balance sheets. Not all the deposits can be used to create more assets and deliver loans onto the market. Significant costs thus occur, including:

  • Payments of bank levies and contributions to Deposit Guarantee Schemes
  • Increased equity requirements that are based on the amount of deposits held
  • Negative interest penalties for liquidity placed in the wholesale market or directly held by the ECB

In order to minimise the impact, retail banks must often lower interest rates for customers, sometimes even pushing rates below zero, to nudge customers’ liquidity into other products. Or simply away, to other providers. This creates not just a dilemma for customers – missing potential yields on their savings and having to leave their home banks – but also for banks. Financial institutions stand to lose long-standing customer relationships unless they succeed in offsetting low or negative rates with attractive enough alternative products or services. So the current liquidity situation is driving banks to look for innovative solutions to the longer-term interest rate impasse.”

 

Sources: ECB, Raisin

 

Austria: Erste Bank, Raiffeisenlandesbank Oberösterreich, Bawag – biallo.at
Belgium: ING Belgium, KBC, Belfius Bank – spaargids.be
France: BNP Paribas, Credit Mutuel, Societe Generale – francetransactions
Germany: Deutsche Bank, Commerzbank, HypoVereinsbank – biallo.de
Ireland: Bank of Ireland, Allied Irish Banks, Ulster Bank – ccpc.ie
Italy: UniCredit, Banca Monte dei Paschi di Siena, Mediobanca – confrontaconti.it
Norway: DNB, Danske, Nordea – finansportalen.no
Poland: PKO Bank Polski, Bank Pekao, mBank – oprocentowanie.pl
Portugal: Novo Banco, BPI, BCP – comparaja.pt
Spain: Santander, BBVA, Caixabank – tucapital.es
Sweden: Nordea, SEB, Svenska Handelsbanken – finansportalen.se
United Kingdom: HSBC, Barclays, RBS – which.co.uk

With 4.7 trillion euros in overnight accounts, Europeans leave interest rates up to 1.85% on the table

In new research, pan-European savings marketplace Raisin has found a wider-than-ever gap between low interest rates at the largest banks and the – much higher – best available deposits across Europe. Despite the European single market, banking customers are getting wildly different offers depending on where they live and where they bank. Their access to a return on their savings depends on their ability to ditch the biggest banks and head out to greener pastures at other institutions. Corporate customers are in even more dire straits, with businesses in most of Europe paying a penalty for keeping cash in the bank.

 

COMPARISONS: RETAIL INTEREST RATES ANALYSIS BY RAISIN

Top 3 banks versus top 3 offers in European countries

The top interest rates slumped this month for most Europeans but they are still many multiples higher than fixed-term savings offers at the biggest banks. Only the UK, Norway, and Poland bucked the trend, with top available interest rates going up. And as ever, the Irish remain stuck with the lowest interest rates in Europe.

These rates are calculated excluding Raisin’s platform and, where one exists, any direct competitor in each market.

  • Best interest rates in Europe: Best offers in the UK, Sweden, Norway, Italy, and Poland are at well over 1%.
  • Worst rates: Customers at the biggest banks in Spain, Germany, the Netherlands, Portugal and Poland all facing fixed-term interest rates under 0.05%. If they switch to other providers their yields multiply 10 to 30 x higher.
  • Not worst, but…: Depositors in Ireland, Austrian, Belgium and Italy face not much better with big bank rates hovering around 0.1%.
  • 70 cents vs. 70 euros: German interest rate gap stretches to a 105 x difference between average big bank deposits and top available rates. A banking customer with 10,000 euros in a 1-year deposit at one of the biggest banks ends up with a 70 cent profit, against a 70 euro return if they go with the market’s top offers. The situation is even more dramatic in Spain, where customers at the biggest banks are earning 0 euros on 10,000 euros 1-year deposits, but if they go with the top offer they come home with 97 euros. In France it’s a 20 to 73 euros difference, and a 2.30 to 47 euros gap in the Netherlands.

 

Top 1-year versus top 3-year deposit rates in European countries

Europeans in the Eurozone alone have 4.7 trillion euros on current accounts earning no interest. The top offers suggest that, unless they’re moving money out of the big banks, they’re losing tens of billions.

  • In face of the coronavirus pandemic, many people don’t want to lock their savings away right now for the longer term, but fixed-term deposits of 1-year and less still offer profitability.
  • Consumers in Europe’s five largest economies (UK, DE, FR, ES, IT) can find top rates between 0.70% and 1.85%.
  • Most top rates slipped downward. Only the UK, Poland, and France saw small upticks.
  • Italy has the highest spread between 1-year and 3-year deposit with 0.67%, while in Norway there’s hardly a difference with 1- to 3-year terms at 1.50 % and 1.51%.

 

ECB DATA: RETAIL INTEREST RATES

Another month, another drop in average interest rates in Europe. The European Central Bank’s latest data from August, released in early October, shows nearly every country losing ground on the most common fixed term deposits 1-year or less.

But the spread of rates for consumers across Europe remains wide, from 0.02% in Ireland and Spain to just over half a percent in France and Italy, to 0.97% in the Netherlands, to 1.63% in Romania.

Average Retail Rates across Europe – ECB

Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

  • Italy, France, and the UK were the hardest hit large economies in terms of interest rates falling.
  • Ireland is truly stuck, and from an interest rate perspective the worst place to be stuck (the bottom).
  • Though nearly all the major economies slipped at least a few basis points, German savers were among the few who escaped punishment, with the German average even moving up a (single) basis point.
  • And in a late summer surge that our research above suggests won’t last, Denmark’s average rate shot up an astonishing 67 basis points. (Let’s hope Danish depositors locked in August’s high rate.)

 

ECB DATA: CORPORATE INTEREST RATES

Businesses have fewer options across the continent when it comes to leaving their cash in the bank. Ten markets still feature negative rates on average, according to the European Central Bank’s most recent data. In another ten, corporate deposits only offer between 0% and 0.1%.

Average Corporate Rates across Europe – ECB

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

  • German corporates are still at rock bottom with an average interest rate of -0.34%, the Netherlands not far behind at -0.29%.
  • Italy and France (0.01% and 0.02%) are at least above water, along with the Baltics and Eastern Europe.
  • Of Europe’s five largest economies, only the UK is up (“up”) at 0.09%. Grateful for the small things.

 

Is it risky to invest deposits in countries with higher interest rates? 

Not exactly, Raisin France General Director Emmanuel Rodriguez explains. He also reveals what most Europeans still don’t know about sending their savings across borders.

“Interest rates on fixed-term deposits always indicate a balance: on one side the risk level investors are willing to accept by depositing their cash, and on the other the growth the banking sector expects. More risk means investors will be expecting a higher interest rate to compensate for depositing their money with that bank and/or the country where it’s domiciled. The financial crisis of 2008-2010 illustrated this point. But one shouldn’t forget the other side of the equation. It reflects the bank’s appetite for funding and expectation for economic growth going forward. If the economic outlook isn’t optimistic, banks aren’t willing to lock in medium/long term funding with higher rates for economic activity that may not materialize. This can be particularly the case in countries highly dependent on exports (e.g. Germany) but also countries where competition is not at play, either because the banking sector is highly concentrated or because its residents have an overall preference for saving instead of borrowing.

“What most regular retail customers don’t realize though, is that they can simply ‘arbitrage’ the market, accessing higher rates with other providers’ top offers – in their home market and elsewhere in Europe – without taking any market risk. European countries and their local banks have all signed onto the European Deposit Insurance scheme. Up to 100,000 euros per person per bank are guaranteed. Furthermore, the single market for banking services is being pushed forward right now, with Europe adopting and implementing additional measures to make the European banking sector even more secure and accessible. This redounds directly to the benefit of European retail banking customers.”

Sources: European Central Bank, Raisin

 

 

Amid uncertainty, Germany looks sturdier than expected as ECB pushes for stronger European Banking Union

With each new release of economic data since the start of the Covid-19 pandemic, Europe’s markets are readjusting. Europe’s largest economy, Germany, may not have sustained the degree of losses first suspected, but the longer-term outlook across the continent appears grim. The European Central Bank (ECB) has advocated for strong action to stimulate the economy, while providing banks significant relief and continuing to pursue its negative interest strategy. The ECB may follow the U.S. Federal Reserve’s new step to aim for a higher inflation level as well.

In an August 26th speech by ECB Executive Board member Isabel Schnabel, which offered an “overall positive assessment of the ECB’s experience with negative interest rates,” she placed the strategy in a broader context:

“While the ECB can mitigate potential negative effects, solutions to the underlying structural causes go beyond the remit of monetary policy. These problems include problems of overbanking and a lack of pan-European mergers, which would require the completion of the European Banking Union, as well as the advancement of the capital markets union, which have become ever more important in response to the coronavirus (COVID-19) pandemic.”

 

COMPARISONS:

While the European Central Bank advocates for single market, national differences remain stark

Consumers in Europe’s largest economies including Germany, Spain, and Italy continue to experience huge interest rate spreads in the deposits market. At the three largest banks in Germany savers can expect a yield on their 1-year term deposits of 0.01%, functionally paying the banks to keep their savings.

Top available offers in Germany average 0.99%, however, enabling depositors who actively seek out the most competitive products to earn up to 74 times more than big bank customers and to beat current inflation numbers.

In Italy customers of the three biggest banks likewise earn just an average of 0.17% on their 1-year term deposits whereas, moving to smaller institutions featuring Italy’s top available deposit products, they can earn up to 1.27% – the highest rate in Europe and eight times higher than the big banks’ best offers.

In Spain depositors shifting their money from 0.10% interest rates at the largest three Spanish banks can earn ten times more, up to 0.99%, with the market’s top offers.

Similarly, smaller markets like Belgium, Portugal, Austria, Sweden and Poland all continue to see top available interest rates on 1-year deposits at five to more than 20 times higher than the yields offered by the countries’ big banks.

 

Note: we only display two decimal points. These rates are calculated excluding Raisin’s platform and, where one exists, any direct competitor in each market.

Medium-term term deposits appear less attractive as top offers slump across most of Europe

The spread between interest on 1-year and 3-year deposit offers remains narrow in much of Europe. There is a difference of less than 2 tenths of a percent between interest rates on top 1-year and top 3-year term deposits in Spain, Portugal, Belgium, and Ireland, along with Norway and Denmark in Scandinavia and in Eastern Europe Poland and Romania.

In Germany, the average top 1-year rate is once again higher than the top average 3-year rate. While Germany’s top 1-year interest rates jumped from 0.89% at the end of June to 0.99% now, with top 1-year rates in Spain and Belgium also ticking upward slightly, top interest rates across the rest of Europe slackened.

Outside the Eurozone, both top 1- and top 3-year interest rates in the UK, Poland, and Norway tanked. In the UK top 1-year rates sank from 0.83% in late June to 0.66% today, according to Raisin’s research. Norway’s 1-year top rate plunged from 2.27% in June to 1.94% today and Poland’s from an early summer 1.60% to 1.30% now.

 

 

RETAIL INTEREST RATES:

Despite sustained low rates, Europeans still have access to profitable returns on savings

With few exceptions, average interest rates on term deposits of 1-year or less are down compared to summer 2019, according to the European Central Bank’s latest data. Among the hardest hit between June 2019 and June 2020 were France, the Netherlands, and the UK, losing between 30 and 45 basis points. Greece also lost 30 basis points compared to June 2019, with interest rates in Finland (-22), Poland (-95) and the Czech Republic (-116) plunging as well.

Germany and Sweden are among the few markets that saw an increase in June 2020 relative to one year earlier, with Germany up slightly by 7 basis points and Sweden by 10.

Of the markets we analyse in and outside the Eurozone, 14 currently have average rates stuck at under 0.2%, including Germany, Ireland, and Spain. By contrast Italy, France, and the UK feature average rates well over half a percent, at 0.64%, 0.81%, and 0.69% respectively.

 

Average Retail Rates across Europe – ECB

Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

 

CORPORATE INTEREST RATES:

German and Italian corporate interest rates fell while Spanish and Irish saw gains

According to the European Central Bank’s latest data the Eurozone’s average interest rate on corporate deposits of 1 year or less – now at -0.14% – lost 1500% since June 2019, amounting to just 15 basis points. The Benelux markets as well as Germany, Ireland and Spain all feature on average negative interest for corporate deposits.

Between May and June, Ireland and Spain jumped 9 and 10 basis points respectively, though still below 0%, with Austria, Belgium and Luxembourg also climbing 3 to 6 basis points.

Corporate rates on average fell in Germany and Italy, -9 and -12 basis points respectively, leaving Germany with the lowest average rate at -0.33%. Lithuania (-13 basis points) and Estonia (-14 basis points) also lost significant ground.

 

Average Corporate Rates across Europe – ECB

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

 

Other sources: European Central Bank, Raisin, Bloomberg, Bloomberg, Financial Times.

 

Savings rates rise during lockdowns, interest rates decline along with inflation

Angela Merkel’s late-breaking proposal to join Macron in supporting some form of Eurobonds to support the Eurozone’s hardest hit countries, puts her in line for the moment with the European Central Bank’s determinedly pro-Euro stance. Thus the EU and Eurozone appear to have received the boost they need to recover economically from the pandemic. The ECB warns that the path forward will nonetheless offer enormous challenges.

The Consumer Confidence Index plunged across Europe over the last several months while savings rates went up sharply as consumers cut their spending in light of the uncertainty due to the pandemic. The European overall inflation rate has also dropped significantly to 0.1%, the lowest level since the summer of 2016, from 1.4% in January 2020.

 

RETAIL RATES:

Pandemic fails to put a dent in interest rate decline

The latest European Central Bank data on interest rates across Europe indicates a slight decline overall, as the Czech Republic dove -30 basis points from the previous month and Denmark -11 basis points.

Ten European markets did not move more than 1 basis point in either direction, however, including Spain, Portugal, the Netherlands and Ireland. Germany and France both slid -3 basis points.

On the upside  Italy and the UK both bounced as of the ECB’s March data, 12 and 8 basis points upward respectively, along with the smaller markets of Latvia (13 basis points up) and Slovenia (11 basis points up). According to our more recent data top rates in both Italy and the UK subsequently sank, likely bringing the average back down (see below).

Average Retail Rates across Europe – ECB

Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

 

COMPARISONS:

Indications of upturn in top rates flatten out as Germany slips back down

Raisin collects current intelligence on interest rates across the continent (two months ahead of the latest ECB data), which shows that the April uptick in interest rates held steady in Austria, the Netherlands, and Sweden. But the upward movement has stopped overall, with just three small increases.

Germany, the UK, and Poland all took big hits: the UK’s top 1-year rate fell from 1.52% last month to 1.18% this month, Poland’s from 2.32% to 1.92% this month, and Germany from 1.05% to 0.98%.

*This data excludes offers on Raisin platforms. The “top offers” category excludes offers from the three biggest banks and reflects the market’s best available offers outside those banks.

 

Top 1-year and 3-year rates

Average of the top 3 term deposit offers for retail customers based on local comparison sites as of 19/05/2020. Criteria: EUR 10,000 deposit; 1 product per bank; offers for both new and existing clients.

Due to the decrease in top interest rates in Germany, April saw a small contraction of the “interest rate shears” in Germany – the gap between the extremely low rates available from the country’s largest banks and the top available offers. Otherwise though there was almost no movement across Europe narrowing or widening the disparity between big banks and best offers.

 

Comparing big banks to top available offers

Average of 1-year term deposit offers for retail customers offered by the 3 largest banks in the local market; as of 19/05/2020. Criteria: EUR 10,000 deposit; offers for both new and existing clients. Usually, largest banks based on balance sheet size, which offer term deposits.

 

CORPORATE RATES:

Interest rate increases in France, Spain and Italy countered by overall descent

The Eurozone average interest rates on corporate deposits slipped to -0.09%, with Finland dropping -27 basis points to -0.02% and Estonia and Austria -14 and -6 basis points respectively.

But several markets saw good news for business depositors. France and Spain emerged out of negative territory: Spain jumped 26 basis points and France 15 basis points. Italy meanwhile jumped 49 basis points, leaving negative rates behind to reach 0.27% in the more recent ECB data.

Germany, Austria, the Netherlands and Ireland, meanwhile, all descended further below zero, meaning corporates are paying ever more for the privilege of depositing their cash with banks.

 

Corporate rates

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

Other sources: European Central Bank, Raisin, Bloomberg, The Economist.

Header image: by j on Unsplash

Raisin interest rate analysis: Cash is king – and smaller banks are raising rates to attract it

European banks appear to be much better prepared for the current economic crisis, caused by the global coronavirus pandemic and subsequent lockdowns to get it under control, than they were for the last crisis in 2009 and 2010. Capital markets and investment banks are facing a lot more uncertainty.

As panicked Europeans move their money into cash deposits, the largest European banks are sinking their interest rates yet further. But Raisin’s latest data suggest that there are key exceptions: European banks looking for funding, welcoming consumers’ increasing desire for liquidity and raising their interest rates.

 

COMPARISONS:

Raisin’s April data shows top retail rates across Europe coasting or even trending upward

Raisin has researched the top interest rates on 1- and 3-year deposits in nine Eurozone countries and six non-Eurozone ones. According to the newest data, Germany’s top rates have risen by more than a third since mid-February, now up to 1.05% on average for top 1-year deposits and 1.14% for 3-year deposits, according to Raisin’s own research. Top rates in the Netherlands have also ticked upward since the start of 2020, if less dramatically.

In both the UK and Ireland, meanwhile, top rates are falling, with Ireland at a new low of 0.07% since March. In the UK, top rates, while up since last month, are still lower than their January 2020 levels of 1.60% (1-year) and 1.92% (3-year).

Meanwhile after months of stasis, both Spain and Italy have experienced a change, possibly reflecting the devastating impact of the pandemic on each country’s economy. Spain and Italy’s average top 3-year rates have both moved upward.

Raisin platforms in Germany, Spain, the Netherlands and elsewhere have registered an upward trend across Europe, as 31 of the fintech’s partner banks have increased interest rates since the beginning of march..

 

Average of the top 3 term deposit offers for retail customers based on local comparison sites as of 21/04/2020. Criteria: EUR 10,000 deposit; 1 product per bank; offers for both new and existing clients.

 

Savings markets across Europe leave big banks in the dust – except for Ireland

Raisin’s research also reveals the gaps between rates offered by each country’s largest three banks and the country’s best available offers excluding those banks.*

Within the Eurozone Germany continues to experience a massive divide: between the 0.01% depositors get at the largest three German banks, on the one hand, and an average of 1.05% from top available offers, on the other. The precise ratio has more than doubled in the last 6 months. Outside the Eurozone Denmark shares a similarly dramatic “interest rate gap” with top banks offering ca. 0% on 1-year retail deposits and top available offers averaging 0.58%.

As long as rates are so low, however, the ratio itself remains deceptive: in fact, nearly every European country currently sees a significant difference between the rates their largest banks are able to offer customers and the best interest rates available in those countries outside the big banks.

Ireland’s largest three banks are beating the market’s top offers , though both the big banks and the top offers are stuck at or under 0.10%.

Spain, meanwhile, with the same low average rate from big banks as Ireland (0.10%), features much more competitive top available offers, with the top three averaging 1.09%.

*This data excludes offers on Raisin platforms. The “top offers” category excludes offers from the three biggest banks and reflects the market’s best available offers outside those banks.

 

Average of 1-year term deposit offers for retail customers offered by the 3 largest banks in the local market; as of 21/04/2020. Criteria: EUR 10,000 deposit; offers for both new and existing clients. Usually, largest banks based on balance sheet size, which offer term deposits.

 

RETAIL RATES:
ECB data: Italy and Germany buck the relentless downward trend

Despite widespread drops in retail interest rates across Europe between January and February, the European Central Bank’s latest data shows Italy pushing the Eurozone’s average rate upward. With Italy up 28 basis points from last month the country’s average interest rate on deposits up to 1-year is now at 1.42%, the only market in the Eurozone over 1%.

Five Eurozone countries currently average under a tenth of a percent interest on the deposit up to 1-year, with another nine countries under half a percent.

Germany, with its average at 0.15%, continues an upward trend, while Spain, France, and the UK slip -1, -2, and -4 basis points respectively. Spain’s average rate of 0.01% has now bypassed Ireland’s on its downward trend to become the lowest average in Europe of all the countries in the ECB’s data.

 

Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

 

CORPORATE RATES:
No relief for corporates in European deposit market

The Eurozone average for corporate interest rates began 2020 with a drop of  -7 basis points only to sink -5 basis points further in February, according to the latest European Central Bank data.

Across all of Western Europe corporates on average are paying for their deposits, with rates at below zero, except Portugal where the average corporate deposit yield is still just 0.05%. Germany has not seen the same uptick  in corporate deposits that the country’s average retail deposits experienced. Both Germany and Spain now average the lowest in the Eurozone at -0.25% on business deposits. Italy with -0.23% and the Netherlands at -0.17% are not far above them.

A further six countries are at or below a tenth of a percent. Only Finland (0.25%), Estonia (0.27%), Greece (0.35%) and Malta (0.83%) have sustained corporate interest rates above a quarter of a percent.

 

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

Other sources: European Central Bank, Raisin, Bloomberg, The Economist.

Header image: by Edwin Hooper on Unsplash

The corona economy: Will Europeans face the challenge with solidarity, or splinter apart?

Massive rescue packages on both sides of the Atlantic have been passed to bail out the hardest hit industries, prevent layoffs, provide fast relief to those unable to work and in other ways dampen the worst immediate impact of the new recession. Italy, together with France, Spain and a handful of the other EU countries suffering most acutely, have pressed for Eurobonds. However Germany and the Netherlands appear unlikely to budge in their opposition. A fairly deep recession is expected, though without an effective pan-European action it will strike very unevenly across the continent.

 

Retail Deposit Interest Rates

Europe’s largest economies see turnaround in retail rates, now ticking upward

The European Central Bank’s latest release of interest rate data – from each European market as of January 2020 – shows that, already prior to the coronavirus outbreak, rates had shifted direction, now moving upward.

This increase was driven primarily by Germany, France and Italy, with the UK and Sweden outside the Eurozone, along with several smaller countries in and outside the zone, also seeing small jumps.

Current Retail Deposit Interest Rates in the EU

Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

Comparing Top Offers: Biggest Banks vs. Markets’ Best Rates

Germany leads a limited upswing, Spain remains stuck, while UK and Ireland continue to sink

Data collected by Raisin at the end of March for 9 Eurozone markets and 6 non-Eurozone markets indicates even stronger increase of close to 25% in both 1- and 3-year interest rates in Germany, with both terms now averaging over 1%. It is the first time German average 1-year rates have topped 1% since July 2019.

The Netherlands, Portugal, Sweden and Poland also saw significant upward movement on both 1- and 3-year average interest rates, after all ending 2019 with stagnation or decreases.

Top rates on 1- and 3-year deposits in the UK, Ireland and Austria, on the other hand, all continued to fall into 2020, after steadily sinking in the final months of 2019. Top offers in Ireland are especially low, with a crushing 0.07% average interest on a 1-year term deposit.

Comparison: Highest Retail Deposit Interest Rates in the EU

Average of the top 3 term deposit offers for retail customers based on local comparison sites as of 25/03/2020. Criteria:  EUR 10,000 deposit; 1 product per bank; offers for both new and existing clients.

While biggest banks stay stuck at rock bottom rates, top offers fall and rise capriciously

Across Europe, the differences between a market’s top available offers and its biggest banks’ offers remain a striking measure of stagnant low rates at the large banks. Since the start of 2020 the significant changes have occurred in top retail offers available to consumers outside of the largest banks.

Most notably in Germany, the three biggest banks continue month after month to offer on average just 0.01% interest on a 1-year deposit. Meanwhile the average of the country’s best available offers has been much more volatile: dropping from January’s 0.88% to 0.80% in February, only to leap up to 1.02% in March.

As a result, the ratio of the biggest banks’ average rate to the averaged best offers has narrowed and then gaped back open. The top available 1-year offers are currently 76 times higher than the big banks’ deposits.*

* The top offers in our analysis exclude those available on Raisin’s platforms.

Comparison: Retail Deposit Interest Rates of the 3 Largest Banks

Average of 1-year term deposit offers for retail customers offered by the 3 largest banks in the local market; as of 25/03/2020. Criteria: EUR 10,000 deposit; offers for both new and existing clients. Usually, largest banks based on balance sheet size, which offer term deposits.

 

Corporate Deposit Interest Rates

Largest European markets see corporate rates plunge, though Germany escapes the collapse

The new year saw interest rates for corporates tumble, with large decreases sweeping from Austria through Italy to France, Spain and Ireland along with several Baltic and Eastern European states.

Of Europe’s large economies only German corporate deposits experienced an echo of the increases in the retail deposit market with an upward movement of 11 basis points. However German companies can hardly rejoice: their average interest rate on deposits of up to 1 year is still below zero.

Corporate rates in Italy and Spain meanwhile began 2020 with drops of 58 basis points, the largest decreases in Europe. For Spain this reversed several months of significant increases at the end of 2019. But for Italy the fall is a continuation of months of decline in corporate interest rates, from 0.44% in November 2019 to January 2020’s -0.20%.

Current Corporate Deposit Interest Rates in the Euro Area

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

Other Sources
European Central Bank, Raisin, Bloomberg, FT

Image: Markus Spiske on Unsplash

Europe awaits next Central Bank announcement as Covid-19 wreaks havoc on markets

As we approach the upcoming March 12th announcement on rates and policy from the European Central Bank, global concerns about the spread of Covid-19, “the Coronavirus,” dominate economic headlines. Traders looking for safety amid panicky stock markets are turning to bonds around the world, while Europe worries how a potential pandemic could damage already stagnating economies. The impact of virus-related disruptions to supply chains is expected to become more discernible over the coming weeks.

 

Retail Deposit Interest Rates

Low, lower, lowest: European Central Bank released final 2019 interest rate data

The most recent European Central Bank data from markets across Europe reveals that, through 2019, only Estonia, Luxembourg and Slovenia escaped the year-long collapse of retail interest rates. Although Italy also saw an upward jump of 22 basis points in its average 1-year retail rate in the last month of 2019, it was still 3 basis points shy of its previous year’s level.

Eurozone’s largest three economies, Germany, France and Spain, saw rates slip further at year end

One-year retail interest rates in Germany, France, and the Netherlands all fell between 10 and 18 basis points between November and December of last year. Likewise Spain and Ireland sank marginally, keeping both markets at the lowest level in Europe with a 0.02% average interest rate for a 1-year term deposit.

Non-Euro countries didn’t escape the downward slide

Outside the Eurozone, both Poland and Croatia saw big interest rate drops, of 62 and 21 basis points respectively, throughout 2019. The United Kingdom also lost ground in the last month of 2019, falling 14 basis points in one month, with a drop of 10 basis points over the entire course of 2019. The other non-Euro countries fared no better than Euro countries, with all but Sweden seeing falling or stagnating rates.

Measured purely against projected 2020 inflation rates (1.38% on average in the Eurozone and 1.69% on average outside), the average European depositor with average 1-year term deposit interest rates is losing money on their savings.

Current Retail Deposit Interest Rates in the EU

Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

 

Comparing Top Offers: Biggest Banks vs. Markets’ Best Rates

Within Eurozone only Italian top rates rise – outside Eurozone rates are much higher

Other than a small increase in Italy’s top 1-year interest rates, top interest rates across the Eurozone hovered at the same levels as last month or dipped. Top average German 1-year interest rates dropped again this month below the market’s top 3-year rates, after a bump last month where German 1-year rates were higher than 3-year.

Ireland, where rates are already rock bottom, sank even lower, so that top available rates are only two hundredths of a percent higher than the big banks’ average.

Outside the Eurozone, just Norway saw an increase across the board with top average 1-year interest rates at 2.35% and 3-year interest rates at 2.36%.

Comparison: Highest Retail Deposit Interest Rates in the EU

Average of the top 3 term deposit offers for retail customers based on local comparison sites as of 17/02/2020. Criteria:  EUR 10,000 deposit; 1 product per bank; offers for both new and existing clients.

If smaller or foreign banks step in where big banks feature low rates, consumers have to choose – but at least they have a choice

With a collapse to ca. 0% in the biggest three banks’ rate in Denmark, the differential of the largest Danish banks’ offers to the market’s best available offers has shot up to 175. This makes even Germany’s infamous interest rate gap look undramatic. Germany meanwhile closed its interest rate “shears” slightly from last month’s ratio of 66, with best offers now 60 times higher than those of Germany’s biggest banks.

In the Eurozone, Spain and Portugal still see a significant gap between the interest offered at the country’s biggest banks and the top available offers, while outside the Eurozone both Romanians and Swedish consumers face a huge differential between top available offers and big banks.

In Ireland, the UK and Norway, the gap between big banks and the markets’ top offers is not as extreme. In the UK, this points to the relatively strong rates offered by the biggest banks. In Ireland, however, this narrow gap signifies the poor choice of interest rates available to Irish consumers across the board.*

* The top offers in our analysis exclude those available on Raisin’s platforms.

Comparison: Retail Deposit Interest Rates of the 3 Largest Banks

Average of 1-year term deposit offers for retail customers offered by the 3 largest banks in the local market; as of 17/02/2020. Criteria: EUR 10,000 deposit; offers for both new and existing clients. Usually, largest banks based on balance sheet size, which offer term deposits.

 

Corporate Deposit Interest Rates

Bleak German corporate rates drag European average down, but other markets are still low

Corporate interest rates sank 116.7% over 2019 across Europe – but Germany’s 214.3% drop over 2019 skewed the European average.

With Germany, Austria, the Netherlands, Belgium and Ireland all featuring on average negative interest rates for corporate deposits, and another eight countries under 0.1%, European businesses are broadly being punished for their cash on hand.

Only in Spain, Italy, Malta and Greece, all between 0.38% and 0.5%, are corporate deposits escaping the worst penalties, but even they are still nowhere close to beating inflation.

Current Corporate Deposit Interest Rates in the Euro Area

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

Other Sources
European Central Bank, Raisin, Bloomberg

 

More banks will pass on negative interest to depositors, following ECB’s decision to leave low rates in place

The European Central Bank will focus over the next year on performing a deep review of ECB policy stances, with a view to shaping a new approach to meet the coming decades. With ECB president Christine Lagarde’s announcement last month that the central bank sees no rate hikes or major policy shift on the immediate horizon, bank heads have begun to speak more forthrightly on the fix they see themselves put in.

This is particularly noticeable in Germany, where rates have been punishingly low on the largest banking market in continental Europe. An increasing number of banks in Germany and the Netherlands have announced that they will be passing negative rates on to retail customers for the first time. Spanish private banking clients have also already begun facing negative rates on their deposit holdings.

Meanwhile 2019 ended with disappointing European economic data and the occurrence at last of Brexit appears to have dampened the UK economy.

Europeans have already lost 350 billion EUR

A new study from German financial news portal Franke Media indicates that since 2011 Europeans have lost upwards of 350 billion EUR due to the sustained period of low interest. In 2019 their data suggest that those in the Benelux countries, Germany, and Austria suffered the most, losing more than 350 EUR per person on average. In Spain, France, and Ireland, the study shows the average saver to have lost between 130 and 180 EUR to low interest rates.

The ECB’s recent data on retail and corporate rates continues to show the slight downward trend we’ve been seeing. Raisin’s own analysis, however, comparing top rates from big banks in each individual market with those markets’ top available offers, reveals several significant new movements.

 

Retail Deposit Interest Rates

Interest on 1-year deposits slides, with threat of further penalties looming

The ECB’s most recent data reflect sinking retail interest rates across many European markets. Bucking the trend France ticked upward by 5 basis points while Germany, Belgium, and Ireland each moved up by 1 basis point. Malta and Latvia alone experienced 10 or more basis points in change in 1-year term deposit rates, since the last data release – both downward. All other markets in the European Economic Area felt just small shifts up or down.

As for the longer view, only in the Czech Republic, Estonia, and Romania are 1-year rates significantly up from the same time one year ago (27, 44, and 25 basis points respectively).

Current Retail Deposit Interest Rates in the EU

Average interest rate for new deposits, private households; maturities ≤ 1 year, ECB data. Note: The Dutch Central Bank time-series for deposits with maturities up to one year includes a country-specific “construction depot” with higher average rates than overnight and term deposits.

Retail Rates: Comparing Top Offers

German and Spanish top 3-year rates slip below top 1-year rates

The top 3-year rates in Germany on average are now lower than the averaged top 1-year rates for deposits. Similarly Spanish 3-year deposit rates are a fraction under Spanish 1-year rates, a relationship which has held steady for over a year. Otherwise, across the European Economic Area only Norway is showing the same trend.

Once again rates stagnated or sank even lower. Within the Eurozone just Italy maintains rates on 1- and 3-year term deposits above 1.25% – at 1.32% and 1.85% respectively. Nonetheless, the three largest Italian banks don’t come close to beating inflation for their depositors, with the average of their top offers on 1-year terms at a low 0.17% (see next chart).

Comparison: Highest Retail Deposit Interest Rates in the EU

Average of the top 3 term deposit offers for retail customers based on local comparison sites as of 28/01/2020. Criteria:  EUR 10,000 deposit; 1 product per bank; offers for both new and existing clients.

The rate gap between big banks and top available offers opens wider

The yawning gap between the average interest offered by Germany’s 3 largest banks and the average rates on Germany’s top available offers* has stretched even farther. This places pressure on German depositors to stay active and search for the best offers, but also shows that there are opportunities for those willing to move their savings, as well as for smaller banks in need of high quality retail funding.

The ratio in much of Europe ranges between 5 and 8 times higher rates for depositors who move their money away from the biggest three banks in their home market, and to top available offers. Given the pervasive low rates overall, this activism on the part of depositors remains the only path to beat inflation and even break even on their savings.

In Italy and Spain in particular, savers can earn ca. a percent more on 1-year deposits (8 to 11 times the interest) with the market’s top offers.

* The top offers in our analysis exclude those available on Raisin’s platforms

Comparison: Retail Deposit Interest Rates of the 3 Largest Banks

Average of 1-year term deposit offers for retail customers offered by the 3 largest banks in the local market; as of 28/01/2020. Criteria: EUR 10,000 deposit; offers for both new and existing clients. Usually, largest banks based on balance sheet size, which offer term deposits.

Corporate Deposit Interest Rates

Despite average increase, companies in 7 Eurozone markets get no interest at all – or must even pay for their cash holdings

At the last release of ECB data on interest rates that we analyzed, only three countries had corporate rates over 0.5% on terms at or under 1-year – Italy, Greece and Malta. Now two of those, Italy and Greece, have seen their corporate rates sink to 0.44 and 0.46% respectively, with five markets below 0.1%.

An additional 7 markets are still at or below 0%: the Benelux countries, Germany and Austria, plus Spain and Ireland.

Current Corporate Deposit Interest Rates in the Euro Area

 

Average interest rate for new deposits, corporates, maturities ≤ 1 year, Euro Area Statistics.

Other Sources
European Central Bank, Raisin, Bloomberg, CNBC, The New York Times, Tagesschau, Franke Media, Sueddeutsche Zeitung, NLTimes.nl.

Feature image: Maryna Yazbeck on Unsplash