An overview of the private bank deposit market in Estonia shows that in August 2024, the interest rates offered by different banks on savings deposits, which give the depositor the opportunity to start using their money again in just a few days without losing the interest earned, may differ by more than 50%. According to Jonna Pehter, CEO of Bigbank Eesti, the financial literacy of Estonians has improved significantly during the period of increasing deposit interest rates, but people have not yet thoroughly explored the possibilities of savings deposits, which, like current accounts, allow for withdrawal of money with a grace period of usually only 1-3 days. "One of the reasons for the problem is probably that different banks call this deposit by completely different names, and the terms and conditions offered also differ from bank to bank. At the same time, the obvious fact that while the owner receives virtually no benefit from the money in the current account, in the case of a savings deposit, he is guaranteed interest. For example, Bigbank, which offers the best interest rate on the market – 3.3%. At the same time, the money remains freely accessible, i.e., if necessary, it can be withdrawn without losing the interest earned, notifying the bank of your intention only three days in advance,” explained Pehter. Incidentally, this is the same interest rate as the Estonian state bonds intended for retail investors. Jonna Pehter said that there were no major changes in interest rates on the savings deposit market last month. She also noted that there is a clear trend that large universal banks pay their clients significantly lower interest rates than their competitors on both savings and term deposits. "The reason is simple – universal banks can use the money in their clients' current accounts to finance their lending activities, essentially for free, that is, without paying interest to clients, hence the low interest in using deposits," explained Pekhter. According to her, nothing will change in this regard until people start to be more active in their finances, and at least some of the billions that are currently in current accounts are transferred to term deposits in a bank that pays better interest. "The difference is obvious – it is the bank that makes money on your money, or you yourself. At the same time, an ordinary depositor does not have to worry about the bank's risk level, because bank deposits of up to 100,000 euros have absolutely the same protection of the Guarantee Fund in all banks," added Pekhter. According to Pehter, this overview only covers the bank deposit market and does not reflect payments on deposits made by savings and loan societies or financial intermediary and trading platforms, as the amounts deposited there are not protected by the Guarantee Fund. According to the latest official statistics published by the Bank of Estonia, the total volume of deposits in Estonian banks was 30.9 billion euros as of the end of July. Compared with the previous month, the volume of deposits has increased by 419 million euros, and compared with the same period last year, by 2.7 billion euros. As of the end of July, households had demand deposits in banks amounting to 8.1 billion euros, while term and other deposits (including savings) amounted to 4.3 billion euros. A similar proportion is observed among corporate bank deposits – 7 billion euros in demand deposits, i.e. in current accounts, and 3.3 billion euros in term and other deposits. August 2024 – Interest rates on savings deposits in Estonian banks Read RusDelfi wherever it is convenient for you. Follow us on Facebook, Telegram, Instagram and even TikTok.
