Charts of the Week

Spain: bank deposit rates continue to rise


The transmission of higher interbank rates to bank deposit rates is still limited in Spain. For the record, the European Central Bank (ECB) raised, amongst other key interest rates, its rate on the deposit facility from -0.50% in July 2022 to 3.5% on 21 June 2023, the highest level since 2001. The 12-month Euribor rate has risen from -0.50% on 31 December 2021 to 4.05% on 21 June 2023.

In April 2023, the rate applied on new deposits with agreed maturity placed with Spanish monetary and financial institutions (MFI) was 2.56% for non-financial companies (NFCs)[1] and 1.41% for households[2]. The transmission rate – calculated for each date as the variation of new deposit rates since 31 December 2021 and the change in the 12-month Euribor rate since 31 December 2021 – was 48% for NFC deposits with agreed maturity and 31% for household deposits with agreed maturity in April 2023.

Spain: pass-through* of interbank rates to
NFC and household new deposit rates

Transmission rates were naturally lower for overnight deposits, with only 6% for NFCs and 2% for households, bringing the interest rate to 0.29% and 0.10%, respectively. This low rate is notably the counterpart for the liquidity service provided by banks. For example, between January 2005 and December 2007, the interest rate on overnight deposits averaged 1.21% for NFCs and 0.53% for households, while the 12-month Euribor rate was 3.40%. Lastly, unlike France, Spain does not have government-regulated saving accounts, and the cost of borrowing is significantly higher, especially for home loans.

The Bank of Spain estimates that these transmission rates are lower than those modelled empirically[3], which confirms the absence of greater competition for deposits. However, transmission rates could rise in the months ahead. They could be driven up by the impact of depositors shifting their deposits towards other assets offering higher returns, and by the use of surplus savings built up during the Covid 19 pandemic, encouraged by a tangible easing of inflation (+3.2% in May), which should continue. The EUR 63.5 bn decline in outstanding amounts of household and NFC overnight deposits between December 2022 and April 2023 was only partially offset by an increase in deposits with agreed maturity (EUR 17.6 bn). The Eurosystem’s ongoing reimbursement of targeted longer-term refinancing operations (TLTRO) will also force Spanish banks to find alternative sources of financing, which will necessarily be more costly.

Thomas Humblot

[1] Weighted average rate, narrowly defined effective rate.

[2] As well as non-profit institutions serving households.

[3] Bank of Spain, 2023, Financial Stability Report – Spring