ECB’s de Guindos: 'Remuneration on Savings Accounts Should Reflect Our Interest Rates'

29 November 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Wednesday said that the ECB’s monetary tightening should be reflected in the interest rates paid on retail deposits so as to help dampen demand.

In an interview with Belgian dailies De Standaard and La Libre, de Guindos said, ‘The remuneration on savings accounts should reflect our interest rates. That is part of our monetary policy transmission.’

‘Because if savings become more attractive, consumers will spend less, reducing demand. This is what we aim for to push down inflation’, he continued.

As the currently high level of liquidity was beneficial to banks, they were being slow to pass on the higher interest rates to savers, he said. ‘But we are also taking measures to reduce excess liquidity, so that higher interest rates on savings accounts will become a reality – sooner or later', he said.

‘The ECB has raised its interest rates with a view to these increases being passed on to all remuneration categories in bank balance sheets’, he said. ‘The level of liquidity in the market was extremely high and had to be reduced. This reduction is under way now and will go hand-in-hand with a decline in these types of revenues for banks.’

Though the ECB’s latest Financial Stability Review showed that banks' profits had increased, de Guindos noted that ‘the cost of bank funding is on the rise’ and said that ‘high bank profitability is not sustainable.’

‘In fact, the financial markets are already convinced of this, as bank share valuations are in no way reflecting expectations of high profits’, he said.