One of the largest banks in Bulgaria announced that they will stop accepting standard time deposits from next month. It is not the only one and a number of other banks are terminating the service. In practice, this means that financial institutions do not need more capital.
At the same time, the bank announced that it was introducing a fee for storing funds in savings and current accounts for accounts over BGN 400,000.
In practice, this means that Bulgarians have to pay to keep their money in a bank – whether for the purpose of saving or simply for operations and transactions through the bank.
There are many explanations for this – from zero interest rates, to sufficient assets and liquidity of large banks. An important factor that put pressure on this decision is the mass savings during kovid-19.
According to BNB data At the end of May 2021, household deposits amounted to BGN 63.466 billion /50.3% of GDP /, and in practice they increased by 11.6% compared to the same month in 2020. The trend is similar in the deposits of non-governmental organizations. sector, which at the end of the month were BGN 96.371 billion (76.5% of GDP) and their annual increase was 11.7% Deposits of non-financial corporations were BGN 29.331 billion (23.3% of GDP) at the end of May 2021. Compared to the same month of 2020, they increased by 12.5%, and in financial enterprises the increase was 6.9% to BGN 3.574 billion.
In other words, deposits of individuals, companies and the NGO sector as a whole have grown by nearly 12% on an annual basis, given that the trend of several years is for a steady increase.
It is interesting to note that April and May are also extremely record-breaking in terms of mortgage borrowing.
Loans to households amounted to BGN 26.694 billion (21.2% of GDP) at the end of May 2021. Compared to the same month of 2020, they increased by 9.7%. At the end of May 2021, housing loans amounted to BGN 12.697 billion and increased on an annual basis by 13.4%. Consumer loans amounted to BGN 12.444 billion and increased by 8.7% compared to May 2020. On an annual basis, other loans decreased by 16.8%, reaching BGN 388 million. Loans to employers and the self-employed decreased by 3.6% on an annual basis in May 2021 and at the end of the month amounted to BGN 374.6 million. Loans to non-financial corporations increased by 4.1% on an annual basis in May 2021 and at the end of months reach BGN 35.798 billion.
Despite the increase in loans, banks have sufficient financial resources to lend without the need to take additional deposits for working capital.
However, this raises the question what to do with our money when we already have to pay for their storage, instead of having a yield in the form of interest. It was the interest rates in the savings accounts years ago that were the tempting factor for the Bulgarians to change the “jar bank” method to opening a bank account. Today, everyone has accounts due to legal changes to transactions, payments, etc. – everything, or almost everything, goes through a bank.
How will investments be redirected?
Experts believe that new banking policy could boost investment in real estate, followed by gold, diamonds and other assets such as stocks. Investment funds are even more uncommon in our country, but probably given the new reality, Bulgarians will want to get acquainted with this opportunity.
In any case, there will be banks left to offer savings accounts, especially among smaller financial institutions, but whether they will not be included in the big ones in a few years and whether the definite end of deposits will come at all remains to be seen.
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