50 billion in savings burned from December to March – Corriere.it

Seven consecutive hikes in just under a year. The tightening of interest rates will also have brought the country back to the “new normal”, but inflation still seems to be resisting the shock therapy of Christine Lagarde. The combination has proved to be a poisoned cocktail for the Italians, who have in fact been forced to save less and less. Result? From December to March families and businesses saw evaporate 50 billion savings from their current accounts.
“Let the banks return the benefits of high rates to customers, inflation is fought with significant economic increases in contract renewals», he says without mincing words Lando Maria Sileoni, general secretary of Fabi, banking union which has analyzed the phenomenon and which from Monday 12 June (and until 16 June) will be at the center of its 22nd congress in Rome.

Wealth in smoke due to high interest rates and inflation

Numbers in hand, the wealth accumulated over the years – warns the autonomous federation – risks going up in smoke in a very short time. The slimming of piggy banks of Italian families had already started in the first months of 2022: the trend in savings was close to zero in the first five months (on average equal to 0.2% from January to May) and with increasing rates of decrease in the remaining semester, but the high prices also began to erode the reserves accumulated by the Italian production system (for a percentage equal to 1.4% or 4.4 billion euros).

50 billion spent to cover consumption and investments

Italian households boasted deposits in bank accounts of approximately 1,163 billion euros at the end of 2021 and 1,174 billion euros in December 2022, while the liquidity held by companies on account stood at almost 428 billion euros at the end of 2022 and 423 billion euros last December. Overall, the two components exceeded 1,500 billion at the end of 2022 which, together with the liquid assets of non-profit organizations, social security institutions and insurance companies, were close to the ceiling of 2,015 billion at the same date, against 2,076 billion euros at the end of 2021. The overall decrease in deposited resources was equal, in just three months, to a good 50 billion euros spent to cover consumption and investments. «If we analyze all forms of deposits in bank accounts, the total deposits “looted” by Italians from December 2021 up to March 2023 are over 61 billion euros, useful for dealing with the economic damage suffered by inflation and the reduced purchasing power», points out Fabi. However, the red alert sounds at the end of the first quarter of 2023 when it is clear that the economic difficulty of chasing the unbridled rise in prices with one’s own income capacity continues, in fact, to heavily erode the liquidity of the system.

The increase in the rates applied to loans and mortgages (not to deposits)

At the end of March of the current year, household deposits contracted by 2.14% – reaching a value of 1,149 billion euro and that of businesses by 7.56%, reaching just under 390 billion. The average variation is 5% and, in monetary terms, approximately 25 billion euros for households and a good 32 billion for the business system. In this framework there is another aspect to consider. The difference in the increase in interest rates applied on the one hand to loans and mortgages and on the other to deposits and accounts. If the former have, in fact, increased substantially over the years – underlines the union -, allowing banks to multiply their revenues and achieve the sole objective of increase profits thus favoring shareholders with ever-increasing dividendsthe others remained almost unchanged, demonstrating that credit institutions have little interest in rewarding those who deposit their liquidity in the bank.
A reality – Fabi reiterates – which is confirmed by the profits as at 31 December 2022 of the major Italian credit institutions, equal to 12.8 billion euros, up 66% on 2021, a sign of increasing revenues, lower cost of credit and operating expenses unchanged.

Digital banks and current account policy

It should be noted that banks have begun to raise rates on some forms of funding, such asand term and time deposits and repurchase agreements, while they tend to maintain particularly low remuneration on current accounts, now increasingly considered a service and not a form of savings. Even if, speaking with bankers, we will hear repeating that current accounts are tools of service and not of investment. If anything, the answer came from digital banks, which have chosen to reward current account holders (also thanks to the fact that they have no costs for structures such as branches). «The purchasing power of salaries, unfortunately, has gone back 25 years. The solution must therefore be sought in the renewal of collective labor agreements, some of which have even expired for more than five years, with significant economic increases. Those who have liquidity in their current account are particularly affected because their money is worth less and less. For this reason it is essential that the banks, which have benefited from the increase in the cost of money, now return a part of those benefits to customers by raising interest rates on current accounts», says Sileoni.