- Political stability
- Fiscal affairs
- Monetary policy
- Regulated markets
- Privatisation
- Macroeconomic developments
submited on 31.01.2011 in category Fiscal affairs | Political stability | Monetary policy | Macroeconomic developments
The banking market in Europe has seen an interesting trend in recent months. In 15 of the 27 member countries of the European Union interest rates on time deposits decreased compared with the levels from 12 months prior. The remaining 12 countries registered increases in the cost of funding during the last year.
The most significant decline in interest rates was reported in the Baltic republics, Romania, Hungary and Bulgaria. Some reduction in the cost of borrowed funds was seen in other Central and Eastern European countries as well.
Banks in advanced European economies such as Germany, Italy and France have been recently raising interest rates on deposits. Most substantial is the increase of interest rates in countries directly affected by the European sovereign debt crisis, including Spain, Portugal and Greece. Compared to a year ago Greek savers require an average of 1.6 percentage points more in order to put their savings in local banks.
One of the factors that contributed to rising interest rates in some European countries is the accelerating inflation in line with reported rising capital gains from trading of shares and commodity-based financial instruments.
Despite the increases, interest rates on time deposits in the Euro area remain low from historical perspective, mainly due to the newly established European Financial Stability Facility and the massive efforts of the European Central Bank to provide liquidity.
The cost of borrowed financial resources from local households remains the highest in Romania and Bulgaria, respectively 7.5% and 5.8% annually for newly attracted bank deposits with agreed maturity.