28
Jun

Why banks reduce interest rates on deposits.

The rate reductions are due to the fact that this strategy brings double benefits to banks. First of all, paying lower interest costs less. In addition, some people discouraged by low interest rates give up deposits and simply keep savings on an interest-free bill. This means for banks a free source of financing. In addition, the advantage of deposits over loans granted is increasing in the banking sector. The value of the former is already 13 percent higher than loans. For comparison, in 2011 the situation was opposite – the value of loans was up by 14 percent higher than deposits. Banks are therefore less and less motivated to pay us high interest rates. They are not able to earn part of our savings because they give too little credit.

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