The world upside down has managed to settle in the conditions of one of the banking products par excellence: deposits. The coronavirus crisis has left a new residue on the savings of companies, whose owners have to pay – directly or indirectly – for the cash they leave in these products. Most businesses already cost money from the capital they have in their bank. This complex reality, which began to spread around 2019, affects most of the savings products designed for entrepreneurs: on average, the bank applies a negative interest of 0.32%. Being negative, it implies that the client is paying the entity and not the other way around, as was the case before.
That is only the average percentage that the bank charges the customer for their savings, according to the latest data from the Bank of Spain. Because in the case of deposits contracted for less than a year in sight, the interest rate applied is -0.33%. It was already negative for months. The novelty is that for the first time they also apply this cost to products with up to two years of life. The interest rate for this type of deposit closed October at -0.03%. It is almost imperceptible, but being an average it shows how there are more companies that pay than those that receive any remuneration, no matter how minimal. Further, on deposits over two years in advance, the interest rate has plummeted to another record low, 0.03%, already looking into negative territory.
The day-to-day reality of companies shows that most businesses leave their money in the bank in sight accounts, and not in term. That is, to use it in their day to day as a treasury tool to face the payments that they must assume in the management of these companies.
Until October, they had 258,879 million euros deposited in this type of account. It represents 11% more than the money saved by entrepreneurs at the end of last year, just before the crisis. During the pandemic, this amount has been increasing, to the detriment of time deposits, in order to be able to agilely manage payments. In fact, very few companies use this type of deposit to one or two years ahead to save cash. They barely have 11,500 million in term, 4% of all the money kept in the banks.
The possibility that banks charge for deposits continues to expand, although it only does so among clients that are companies. The casuistry is very heterogeneous, although in general terms the entities used to apply these costs for those users with whom they had the least connection. They were the ‘inactive’ profiles, although as negative rates become general, more and more users see how they assume that expense.
Two years of expenses
This reality began to be implemented at the beginning of 2019, when some banks began collecting certain corporate savings products. They first focused on large corporations as well as investors such as family offices. But little by little its application has been spreading.
The executives of all banks have insisted that they will not charge private customers for having their money deposited in their entities. Until now, the average rate of remuneration is practically 0%. That is the main fear that individuals have, although the banks have insisted until now that this situation will not be reached.
The latest measures taken by the ECB to sustain the economy will deepen its negative interest rate policies: the rate it charges banks for savings remains at -0.5%; and there are no signs that rates could begin to rise in several years.
As long as the bank can sustain this situation, they will not charge for household deposits. And this despite the fact that its amount has increased as never before in such a short time as a result of the paralysis of activities. From January to October, money saved in deposits has risen by 10%, from 712,000 to 782,000 million euros.