In December, the interest rate on new deposits in Portugal was the lowest in the euro zone, at 0.35%, well below the 1.44% of the euro zone average, according to the Bank of Portugal. © PAULO SPRANGER/GI Comment Banks are not raising interest on deposits in the way expected, with economists justifying it with banks' excess liquidity, which has led customers to move money into savings certificates. The European Central Bank's hike in key interest rates (as a mechanism to fight inflation) has pushed up Euribor rates, which increases the instalments on loans indexed to Euribor, but would also be expected to push up the remuneration on bank deposits. However, for now, the rise in interest on deposits remains very contained, especially in the major banks (there are smaller institutions with higher returns), which in view of high inflation and the costs of bank commissions means an effective real loss of the money deposited. According to data from the Bank of Portugal, in December, the interest rate on new deposits in Portugal was the lowest in the euro zone, at 0.35%, well below the 1.44% of the euro zone average. In France and Italy the rates are already above 2% and even in Spain (country with a strong presence of banking groups in Portugal) the average rate was 0.64%. For economist António Nogueira Leite, this is due to the fact that banks have high liquidity and a cautious credit policy in recent years. "Unlike what happened in 2011 and in previous and subsequent years, banks have immense liquidity and, from a perspective of maximizing their results, what makes more sense is to pay less to depositors than would be their expectation," said the former vice president of Caixa Geral de Depósitos (2011-2013), secretary of state for treasury and finance in the last socialist government of António Guterres and economic adviser to Passos Coelho (PSD). CGD is one of the lighthouses of the market and a different attitude of the public bank would have great influence, however, also there the interest on deposits remains low. "According to the agreement made with the Directorate General of Competition [of the European Commission], CGD behaves like the others, as a private profit-maximizing entity. In another situation it would give another indication to the market," explained Nogueira Leite. Customers in Portugal are generally not very dynamic in their search for better financial products, so banks are comfortable even giving low returns. The amount of new term deposits by individuals amounted to 49,393 million euros in 2022 (43,016 million in 2021). At the press conference to present the 2022 accounts, the president of Santander Totta (the bank had profits of 568.5 million euros), Pedro Castro e Almeida, considered it normal that the rise in interest on deposits is delayed because "rates rose very quickly" and recalled that "there are alternatives in Portugal" among products considered low risk and with guaranteed invested capital. "Look at the savings certificates," he said. Castro e Almeida said that the issue of savings is of the richest 10%, because the rest of the people have little savings. For his part, the CEO of BPI, João Pedro Oliveira e Costa, said he doesn't want clients to take their savings out of the bank for savings certificates and criticized the high remuneration that the State assigns to this product. "It wouldn't be necessary for the State to pay so much, but I understand the incentive to save," he said at the press conference of the annual results (profits of 365 million euros in 2022). For Ricardo Cabral, Professor of Economics at ISEG, among the big banks "there is a gentlemen's agreement not to run aggressively for deposits", but he considered that banks are starting to have a big incentive to go get more deposits and are already starting to entice large depositors. This is because the excess liquidity that each bank puts into the ECB already yields 2.5% of interest (the current deposit interest rate). So with deposits earning virtually zero interest and money yielding at the ECB the banks doing nothing make millions in financial margin. "It's risk-free business," he stressed. About the criticism of bankers to the remuneration of savings certificates, Ricardo Cabral recalled that for decades the state finances itself in retail and "is not here to grant favors to banks", so it should give remuneration it considers appropriate. In 2022, according to IGCP, the total direct debt of the state (287 billion euros) about 12% was in savings certificates and treasury certificates, a proportion that has remained stable in recent years. In December alone, according to data from IGCP - Treasury and Public Debt Management Agency, inflows of money in savings certificates were 1,994 million euros (up from 1,764 million euros in November). Outflows (amortizations) were 78 million euros, bringing the balance of savings certificates to 19,626 million euros on December 31 (the highest value since at least 2006). According to reports made to Lusa, the high adhesion makes in many post offices citizens face long waits to make applications in savings certificates. This week, during a parliamentary hearing, the IGCP said that it wants to expand the distribution network for these products in order to reduce costs with the CTT, and that it is studying other ways. About a possible distribution by banks, Miguel Martín said that, unlike other countries in the euro zone, in Portugal "the banks are not interested because they understand that it cannibalizes their deposits. According to the IGCP, in February, new subscriptions of savings certificates have an interest rate of 3.403% gross. It should reach the maximum value of 3.5% in March. [Additional Text]: Excess bank liquidity still keeps deposit interest rates low Dinheiro Vivo/Lusa