By Chrysostomos Tsoufis

Shut the door…..

For two hours, after all, they discussed the matter on their first date Kostis Hatzidakis with the Union of Greek Banks. And of course the Ministry of Finance could not not raise the question of the “injustice” that the depositors are experiencing, as the gap between in interest rates on deposits and loans is constantly expanding.

Banks responded in essence that they have exhausted their margins with the primarily selective increases in term deposits, but of longer duration, which they proceeded with in the previous period. But to… gild the pill, they pledged to carry out a campaign to inform depositors about other banking products – apart from savings deposits – that have higher returns.

In June 2022, shortly before the barrage of interest rate hikes from the ECB begins, the interest rate spread – i.e. the difference between the interest rate on deposits and that on loans, was 3.95%. 11 months and 8 rate hikes later, the margin has exploded to 5.76%, an increase of 46%.

The Ministry of Finance cannot compel banks to raise deposit rates, but this does not mean that they will sit back and watch the gap widen. So it is trying to improve the image, adding competition to the systemic banks with specific initiatives:

  • ACTIVATION OF THE HERCULES PLAN. Until now, the 2 activation phases of HERAKLI concerned only the bad loans of the systemic banks. Its 3rd activation is planned to include the red loans of the smaller banks, such as the cooperatives which, by lightening their burdens, will be able to offer more competitive products. That could put pressure on big banks, which would naturally not want to see their depositors flock to their smaller rivals.
  • ABOLITION OF THE SELF-TAXATION OF GOVERNMENT SECURITIES. This was announced by Kostis Hatzidakis from the floor of the Parliament during the programmatic statements and makes the bonds and interest-bearing bills of the Greek State at least directly competitive with term deposits. Based on the existing framework, the holder of a Greek Government bond is taxed at 15% if he chooses not to wait until maturity and sells it on the Secondary market. Now this 15% is a thing of the past, instead 15% of interest taxation remains. I should note here that the bond’s return after deducting and miscellaneous fees is over 3%, while the return on a one-year fixed deposit is about half that.
  • EXTENSION OF BANK LOAN. Another announcement by Mr. Hatzidakis with the aim here to reduce the interest margin from the side of loan rates. In other words, to give the possibility of granting loans to non-banking institutions always based on the best international practices.