ECONOMY

Time deposits losing their shine

The amount of money being placed in time deposits fell in August, reflecting a change in sentiment stemming from the crisis and the sharp rise in interest rates previously offered by commercial banks. Bank of Greece data show single-digit growth rates in savings deposits from households and businesses in August for the first time, as opposed to sharply higher expansion rates in the last two years, which had reached as high as 50 percent. Time deposits at the end of August reached 137.8 billion euros, versus 138.4 billion in July and 142.7 billion at the end of the first quarter of the year while growth of savings deposits was only marginal. Returns on time deposits are gradually reaching the same level as the Euribor rate. Indicative of this trend is that the average interest rate for a three-month time deposit is currently less than 1.5 percent. Bankers claim that an average interest rate of 2 percent offered for many six- to 12-month time deposits is generating a loss for the lender when the three-month Euribor rate is at 0.7 percent. It seems customers will have to come to terms with banks offering a high interest rate for only a part of their money or for a certain time period. Central bank data indicate that the decrease in interest rates in the period between January and August this year moved at a slower pace than the deceleration of inflation. The average real interest rate on one-year time deposits rose to 2.07 percent from 0.11 percent in the same period a year earlier. In a bid to satisfy current needs, lenders have started offering products that give customers greater access to their money. Banks have also started offering customers incentives for leaving their money in an account for longer periods of time.