Get Even More Visitors To Your Blog, Upgrade To A Business Listing >>

ECB cuts interest rates: No bank deposit flights yet

The Ecb Cut Interest rates to -0.04%.


This is a real problem for banks as their profit margins get squeezed. Banks will not gain a lot of money when they can't lend at normal rates. On top of that, some European countries like Belgium have a minimum Deposit interest rate that needs to be paid to customers like us (0.11%). So banks get less money from loans but still need to pay depositors 0.11% interest.

Another problem is that depositors will think: "Hmm I can't earn any money on my deposits, so I'll take the cash out of the bank." And if we ultimately see negative deposit rates, people will certainly take their cash out of the banks.

That's why it's very important to see what the deposits are doing.

I created a chart of the deposits of Euro Area Residents, to be found here.
I had expected that when the ECB Cut Interest Rates below zero since 2014, that we would see a deposit flight happening. But we actually see more deposits on the banks. Very counterintuitive and needs to be monitored in the next months.

This post first appeared on Correlation Economics, please read the originial post: here

Share the post

ECB cuts interest rates: No bank deposit flights yet


Subscribe to Correlation Economics

Get updates delivered right to your inbox!

Thank you for your subscription