Wednesday, March 2, 2011

Private Sector Deposits

We previously looked at the balance sheet position of deposits in Irish banks (all banks here and the ‘covered’ banks here).  While no one disputes that Irish banks are losing deposits, the actual rate of decline is subject to question due to the non-consolidated method the Central Bank uses when compiling the Banking Balance Sheet tables in the Money, Credit and Banking Statistics. 

This means that if an Irish bank moves deposits in an internal intra-bank transfer or between subsidiaries it could appear that it is losing deposits if this transfer is to a non-Irish subsidiary.  There have been suggestions that about 75% of the apparent €18.5 billion loss of deposits in the covered institutions that occurred in January is due to such transfers.  As we have noted most of the changes in deposits in Irish banks has occurred in the ‘Other Financial Intermediaries’. 

What we will look at here are private sector deposits of Irish residents.  This figures will be changed by the actions of depositors rather than the bank that holds the deposits.  First up, are total private sector deposits of Irish residents in banks in Ireland and these are definitely falling.

Private Sector Deposits

In August 2009, private sector deposits totalled €187 billion.  The January 2011 total is €167 billion.  The Central Bank breaks this down into deposits by four sectors:

  • Households
  • Non-Financial Corporations
  • Financial Intermediaries
  • Insurance Corporations

Irish Residents Deposits by Sector

Deposits across all sectors are falling.  Here we isolate Household Deposits.  Between January 2010 and January 2011 these fell from €99.5 billion to €94 billion and are on a largely unbroken downward trend.

Household Deposits

Across the different deposit options available to households we see that the decrease has been driven by a fall in long term deposits as we can see here.

Household Deposits by Category

Deposits in accounts that need more than 3 months notice and mature in less than two years have fallen from €37 billion in January 2009 to €28 billion.  This could be caused by falling interest rates but we do not see an increase across the other categories, so these deposits have not been replaced (in Irish banks).

On the business side we see a similar drop in deposits.

Business Deposits

Again it appears to be long term deposits that are driving the fall in deposits.

Business Deposits by Category


  1. Seamus.

    We have been hearing ad nauseum that the savings rate has never ben higher.

    Does the fall in household deposits in the chart above contradict that. A fall in long term household deposits, if these are not 'exported' should mean on a prima facia basis that people are running down savings, not saving more.
    There is also anecdotal evidence that AN POST is picking up a lot of deposits. Is AN POST included in the 'bank deposits'? Does the fall in household deposits above include AN POST?

  2. Hi Tumbrel,

    An Post is not included in the Centrak Bank statistics. I think, though I could be mistaken, that this is because it doesn't issue loans, i.e. it is not a credit institution. Anyway deposits in An Post are not included so some of the savings could be going there.

    On the savings rate, the estimate of 10%+ comes from the household sector non-financial accounts. In these savings is defined as any disposable income that is not used for consumption. Thus money used to pay down debt is also saving. I would guess that a lot of our "saving" is actually going into loan accounts rather than deposit accounts.

    This may be due to increased repayments on loans or reduced borrowinsg for consumption. For example if I have €100 of disposable income, spend €90 and put €10 in bank (deposit or loan account), the savings rate is 10%. If I borrow €10 for consumption (e.g. car loan) the savings rate is actually 0% even if I put €10 of my original income on deposit. The €90 of income and €10 borrowed means I am spending the equivalent of my disposable income (€100).

    In Ireland we're spending less and borrowing less so the savings rate has shot up. Even if our savings behaviour had not changed the hige changes in the credit and borrowings are affecting this and as you say this does not show up as more money in the bank, but it is showing up if we look at the falling credit figures.

  3. Seamus, In relation to the movements in Household Deposits I would suggest that there are a number of different movements taking place.

    Many parents are providing regular assistance to their children and their families by regular cash transfers. I can see this among my own colleagues. This falls in with your comments directly above.

    However are we seeing the flight of cash to safer havens? The loss of nearly 25% of longer term household deposits would seem to suggest an outbreak of suitcases to Zurich.

    Finally many Irish subsidiaries of multi nationals held large deposits. I would presume that much of that money has been siphoned off and out of the State.

  4. Hi Niall,

    I know of no way of checking of a deposit flight like this. Is there a data source that registers Irish deposits held abroad? It is very unlikely than other countries provide data on Irish deposits held there.

    So, of course, this flight to safer havens is plausible and there are some anecdotal stories of people going abroad (Frankfurt, London, Zurich) with huge bank drafts in their pockets to lodge in new accounts over there. We cannot discount this, but nor can we actually see it in the data.

    In relation to the multinationals, again it is hard to tell. I would think that many of them would have rules in place governing the rating of the banks they can keep deposits with. This could be a factor in the decline of business deposits but we cannot isolate it from the general trend.