Now the pace is 10 billion euros, little more little less, every month that passes. It is the flow of deposits on current accounts in the bank of Italian companies and households. An imposing non-stop flow that has lasted for years and that Covid has only increased. That flood of cash, which Italians rely on on accounts held by banks, travels to rates close to 10% per year and brought the stock of parked assets in coffers of the institutes with figures starting to be valid on Gross domestic product year of the entire country.
In June 2021, according to the latest statistics from the Bank of Italy, Italian families had deposited in current accounts 1.131 billion, 64 billion more than in June 2020. Businesses on the other hand, for treasury needs, they still had 392 billion on current accounts in June of this year, 60 billion more than 12 months earlier. In total between households and businesses lie in ordinary current accounts over 1,500 billion euros. A mass of firm money, eroded sooner or later by inflation, and above all a no cost for banks.
A mountain of money that speaks volumes about pessimism of Italians compared to the future which tends to dramatically increase uninvested, readily disposable liquid assets. A symptom of the concern for future destinies and distrust in financial investments. Both the bonds that now yield nothing, be the stock exchanges (which continue to rise, in the absence of alternatives) to which the people of Italian savers have always been little used to. Firms on the other hand prefer to accumulate liquidity, not investing. And blaming Covid for slowing consumption by increasing the savings rate is an understatement.
It’s been years now that the trend is manifested of the continuous increase in the liquid reserves of Italians. Just browse the statistics of the ABI to realize it. According to the association of Italian banks, the total deposits they provide the raw material of the collection banking and which includes not only private individuals but also the public administration, reached the figure of 1,781 billion in June this year. They were 1,636 a year earlier and even “only” 1,336 billion in June 2016. A formidable increase of almost 450 billion euros in only 5 years of the sums kept in the accounts by the Italian universe. It is well understood how Covid has only pushed even more the tendency of Italians to keep money under the bank mattress.
But beyond the signal that the tendency to accumulate resources provides, there is an aspect on which few linger. And it is in fact the great gift that the Italians have continued to do for years to the accounts of the often reviled banks. In fact, for at least 5 years, free, unconstrained current accounts they pay no interest. Zero, or rather 0.03%, is the average rate applied to the balances of ordinary accounts. It goes a little better for those tied up in the duration who manage to pay an average annual interest rate of 0,32%. Excluding the expenses of keeping the account, here is the savings of the Italians left on current accounts become a gift for the banks. Only on ordinary accounts between households and businesses there are over 1,500 billion that they do nothing to customers and instead finance bank deposits for free. Merit or rather the fault ofit was zero interest rates that pervaded the post-financial crisis years of 2008.
Rates have also dropped for the banks that before lent at 5-6% and today they manage on average to lend money around a modest 2 percent. But with zero interest on the 1,500 billion of Italians, the banks still succeed to check a minimum of profitability. If only the 1,500 billion deposited for free by the Italians were remunerated even by a percentage point, here it is for the banks it would be serious trouble. The spread on lending and borrowing rates would be reduced to 1%. In a nutshell, it means that banks save every year, with zero interest on ordinary customer accounts, a figure of at least 15 billion a year. And so it has been happening for at least now 5 years.
If you think that the Italian banking system earns around 39-40 billion from money lending activities every year, those 15 billion donated by savers make the difference for the banks between life and death. Among other things, all that liquidity that ends up in banks’ coffers it is not fully used to make loans. Ben reports a study of the Fabi, the Italian banking union, which shows how the rate of deposit growth has been in the last 5 years of 23% against a 9,9% increase in granting of mortgages. In fact, therefore only part of the increases monsters of deposits finances the favorite asset of the Italians which is the purchase of the house. And also on the overall front of loans to businesses and households the gap remains. While deposits rose double-digit, total loans stop at just over just under 4-5%.
And so the rush to leave money in the bank (for free) does not turn with the same intensity into new loans to the real economy, but ends up in part providing liquidity to banks who often employ it for buy government bonds. Italian government bonds in the belly of the banks have gone from 200 billion in the past years to the threshold of 400 billion in these months. A binge which allows banks to earn between coupons and capital gains on Treasury bonds a few billion more without credit risk. It is the paradox that the banks make those profits with the money taken for free by their customers.
