A customer leaves a Piraeus Bank branch in Thessaloniki, Greece, expressing frustration with banks prioritizing profits over people. This sentiment resonates with European savers who are dissatisfied with the lack of returns on their savings despite rising interest rates. While mortgage payments have increased due to the European Central Bank’s rate hikes, savings account rates have not followed suit. The deposit delta, which indicates the increase in policy rates passed on to depositors, reveals that only half of the ECB’s interest rate increase has been transferred to depositors on average. However, there are significant variations among Eurozone countries, with some nations like France and Italy passing on higher rates and others like Croatia and Cyprus lagging behind. These discrepancies can be attributed to differences in the banking industry structure, deposit nature, and alternative investment opportunities. Factors such as liquidity levels and market competition also impact the rates offered to savers. As a result, some retail investors have turned to more attractive investments like government debt certificates. However, even in cases where savers find higher returns, there have been instances where governments impose caps on those returns, potentially influenced by pressure from the banking sector. Amidst these challenges, disgruntled savers pose a threat to the banking sector’s reputation and trust. Increased profits have sparked discussions about windfall taxes, as seen in Italy and Spain, where lawmakers aim to tap into banks’ returns. While some savers feel deceived by higher mortgage payments and stagnant savings rates, governments and regulators seem more concerned about the stability of banks. This has led to questions about the actions or lack thereof taken by regulators. The Financial Conduct Authority (FCA) in the UK has announced plans to ensure that interest rate rises are appropriately passed on to savers. Similarly, ECB officials have emphasized the need for banks to raise rates on deposits in tandem with asset-side rate increases. However, there has been no comprehensive investigation or action from regulators thus far.
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