The interest rate paid on European deposits has risen to its highest level in 14 years, but is still well below the ECB deposit rate and with significant divergence by country. The shift from overnight deposits to time deposits and money markets continues. The ECB has also published the interest rates paid on bank deposits in the eurozone, with the rate paid on household term deposits rising by two tenths of a percentage point in October to 3.3%, its highest level in 14 years (since 2009), but still well below the ECB deposit rate of 4%.
This is unique as historically the deposit rate has always been higher than the ECB deposit rate, except in the current context of rising rates. Moreover, this 3.3% rate on time deposits marks a widening gap with respect to the 0.35% paid on overnight deposits, so it is not surprising to see a progressive shift from overnight deposits (down €836mm at YTD level) to time deposits (up €791mm) and money markets (up $79mm, source EPFR).
By country, the increase in interest rates on new household deposits has been more pronounced in Italy and France (up to 3.8% in both cases), while on the other side of the scale are Spanish household deposits, with a remuneration of 2.4% at the end of October. The rise in interest rates has been more homogeneous in company deposits, to a level of 4% in France, 3.7% in Germany and Italy and 3.5% in Spain.