Banks rule out deposit war as EURIBOR hits 1.2%

Banks rule out deposit war as EURIBOR hits 1.2%

Why do your mortgage costs rise while your current account pays zero? In the first half of 2010, with the EURIBOR slightly above 1.2%, Spanish banks remunerated customer deposits at 4% or 4.5%. Now, as the EURIBOR approaches closing August around that same 1.2%, banks continue to pay zero for savers' liabilities. The sector admits without fanfare that the liquidity war of the past will not be repeated.

Why banks don't raise deposits despite rising rates?

The official explanation fits in one sentence. In 2010, banks had unbalanced balance sheets—more assets, i.e., credits, than liabilities—and bought liquidity at any price. The current argument is the inverse: entities are awash in liquidity thanks to years of ECB expansionary monetary policy, and post-credit crisis regulations force them to maintain larger cushions to withstand capital flight. Translation: they don't need your money, so they don't bid for it.

The precedent they cite is British: with rates at 1.75%, deposit remuneration stays below 0.5%. The guidance from the ECB and Christine Lagarde points to official rates of 1% in September, with room for further hikes if inflation doesn't ease. On paper, this should push liabilities up. In practice, no one in the sector dares to promise it.

From Sabadell's 2% to 4% Italian deposits

Something is moving, albeit slowly and with tricks. Sabadell offers an online account that remunerates up to 2% on the first 30,000 euros, limited to customers without prior ties: it's customer acquisition, not liability capture, they say. Renault Bank has scaled up to an account at 1.61% and a two-year deposit above 3%. Facto pays 4% for three months and 4.25% for six. MyInvestor has raised its account to 2.5%, only for the first year.

Outside Spain, the range widens: one-year deposits at 4.15% in Italy, 3.45% in Estonia, accounts at 2% with no conditions in Germany. The full list, with terms, cancellation conditions, and fine print entity by entity, turns this matter into an exercise in patience rather than profitability.

Mortgages: 114 euros more per month for a typical mortgage

While liabilities remain static, assets move on their own. A typical mortgage of 150,000 euros over 25 years facing an August revision pays about 114 euros more per month: nearly 1,400 euros additional per year. The EURIBOR, which reached negative territory, now trades at a daily rate around 1.4%. New fixed-rate mortgages have also become more expensive, and variable ones feel it at each revision. Signing today is not the same as signing a few months ago, and that admits no debate.

What happens if I place savings in a foreign bank?

The obligation to declare via form 720 starts above 50,000 euros deposited outside Spain; below that, there is no need to report balances. What is always declared is the return obtained, whether a deposit, dividend, or capital gain. And the guarantee is the same as here: the deposit guarantee fund covers up to the legal limit, with the nuance that if the entire system wobbles, it will do so simultaneously everywhere.

For those who don't want to cross borders, the latest Spanish Treasury bill auction at 12 months resolved at 1.408%, and the 6-month one at 0.868%. These are figures that any foreign deposit easily surpasses.

Sector advice: funds, public debt, and remunerated accounts

Banks insist that conservative savers can already benefit from rising rates through remunerated accounts, public debt, private fixed income, or liquidity funds. The uncomfortable data comes just after: in recent years, the sector has succeeded in shifting classic deposit investment, which has no risk, toward off-balance-sheet products like investment funds, which allow charging management fees even if they generate losses. The saver assumes the risk; the bank, the commission.

The window for 4% deposits is closing

Notable in the final stretch is the calendar. Entities have started cutting deposit remuneration before the ECB has made its move, and the market assumes the practical barrier is now at 2.5%: improving it is becoming complicated. Real profitability calculation doesn't help. With inflation perceived between 4% and 5%, a nominal 2.5% remains, after taxes, at just over 2%. Lose or lose less.

The official consolation remains, repeated with all the solemnity in the world: conservative savers can already benefit from rate hikes. Benefit. That is the word they use.

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