Bank of Spain raps knuckles over the low interest on deposits

THE Bank of Spain homed in on the low interest rates paid on bank customers’ deposits.

In an article in its most recent Financial Stability Review, Spain’s supervisor pointed out that the country’s banks had fallen short of its expectations regarding the effects of the continually-increasing interest rates on clients’ savings.

Against what it described as “a backdrop of sharp monetary policy tightening” the article studied the links between bank deposit costs and the Euribor, referring to the basic rate of interest used in lending between banks on the European Union interbank market.  This is also used as a reference for setting the interest rate on other loans.

In particular, the Financial Stability Review stated that the remuneration on sight deposits – accounts where withdrawals can be made without notice, or after a very short period – was currently “insignificant.”

It went on to point out that of the 352 basis points – equivalent to 3.5 per cent – that the Euribor increased in 2022, only 0.7 per cent was passed on to customers’ savings.

In the case of time deposits, where withdrawals cannot be made before a set date or for which notice of is required beforehand, banks have only passed on 4 per cent of this increase.