Banks earn more while their customers earn less

Despite the fact that the ECB has continued to raise interest rates, Spanish banks have kept the average remuneration on new deposits far below the rates offered by other European countries, taking advantage of the rise to earn more money from their customers.

The Spanish banking sector has shown itself to be one of the slowest in the whole of the European Union to reflect the European Central Bank’s rise in interest rates with a better return on deposits. In fact, according to data published by the ECB, banks in Spain and Cyprus were the only ones in the eurozone to start the year by reducing the remuneration they pay on deposits to their customers.

Spanish banks went from paying 0.64% in December 2022 to 0.59% in January this year, while in the eurozone as a whole banks raised rates on new deposits to an average of 1.65%. This happened at the same time as the interest differential between mortgages and deposits increased by 0.66 points since 2019, thanks to the fact that banks have made lending more expensive much faster than increased deposit remuneration.

All this has happened in a context where the big banks – CaixaBank, Banco Santander, BBVA, Banco Sabadell, Bankinter and Unicaja – have earned 5,696 million, 14% more, in the first quarter of the year compared to the previous period, despite the new tax on banking. The CEO of CaixaBank, Gonzalo Gortázar, argued that, “there is no extraordinary profit” and that it was a “modest” result, despite the fact that the financial sector recognises that interest rate rises have played a significant role.

A watered-down justification

The banks justify themselves by saying that, despite the ECB’s rate hikes, they are not paying more interest on deposits because they have plenty of liquidity. And it is true that many of these financial institutions enjoy ample liquidity thanks to bond purchases and long-term capital injections due to governments’ expansive monetary policies, which is why they no longer depend on depositors to finance their business.

However, this explanation seems poorly founded when we consider that Italian banks are the most liquid in Europe – far more so than Spanish banks – and, even so, pay more for deposits, in some cases up to 5% interest. Moreover, Spanish banks in Italy do offer a better return on their customer’s money than they do in Spain.

Given this situation of indifference of the financial sector towards the interests of its customers, it is not surprising that, although Spanish banks have begun to improve the remuneration of savings, during the first two months of the year Spanish families withdrew 18,000 million euros in deposits from Spanish banks in search of a better return on their money.

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