Banks stop time deposits – what are the alternatives

Despite the zero interest rates, the deposits of this group are the most – in recent months they have grown by an average of over 10% – in June the increase was 11.6%, as was the increase a month earlier. The total deposits of the non-governmental sector (with added to companies and non-financial enterprises) are BGN 96.8 billion. The loans granted to the non-governmental sector are BGN 67.4 billion – or in this case their level to deposits is much lower. For comparison – more than ten years ago this ratio was reversed and to feed the hunger for credit, banks provided resources from their headquarters in Europe, loans, and attracted deposits with high interest rates. This change is one of the reasons why banks restrict the flow of deposits to them, especially since their free funds, which they hold with the BNB, are taxed at a negative interest rate. The suspension of time deposits is hardly the only reason to look for alternatives – in recent years, two sources for this are zero interest rates, but also the boom in stock markets, which increased the appetite for risk.

After all, what are the alternatives

Mutual funds: The closest one is the mutual funds – a pool of investments in various financial assets (stocks, bonds, deposits, etc.). Their portfolios are structured by specialized professionals in licensed management companies, access and exit to and from them is open and everyone can invest their funds in them. Their activity is regulated by the Financial Supervision Commission. Due to the large set of instruments in which mutual (or also called mutual) funds can invest, they are divided according to their investments into risk profiles. The highest risk are those in stocks, and the lowest – in bonds and money market instruments (such as deposits and instruments with a maturity of up to 1 year). The higher the risk, the greater the chance of winning, but also of losing. Therefore, everyone can choose a scheme according to their risk tolerance and investment horizon. Revenues from mutual funds are exempt from tax, but there are fees for managing the entrance or exit. In addition, their funds are not guaranteed by the state, as is the case with deposits.

The low levels of interest rates and changes in consumer behavior during the pandemic definitely stimulated increased interest in investing in mutual funds, as demand accelerated in 2021. In our country, the assets of “Elana Fund Management” increased by BGN 19 million for 6 “The months of the year”, Nikolay Pavlov, Director of Investor Relations and Member of the Board of Directors of Elana Fund Management, commented to Capital. He added that they registered an increase in interest in both conservative funds and risk schemes – depending on whether people choose short-term or long-term investment. “Definitely the most sought-after form of investment are the savings plans related to the funds, because they are convenient with small monthly installments,” Pavlov added.

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