Romanian companies cut savings in bank deposits on negative real interest rates

Romanian companies reduced their savings in bank accounts in May on low incentives as financial institutions offer negative real interest rates.

The amount of deposits declined by 0.2 percent month-on-month in May but rose by 9.1 percent year-on-year, to RON 336.6 billion (EUR 70.9 billion).

Companies’ RON bank deposits declined by 0.7 percent while forex deposits dropped by 2.5 percent month-on-month as banks pay negative real interest rates.

In April, the average interest rate at bank deposits in Romania was below 2.5 percent while inflation rate was over 4 percent – meaning that companies and households keeping their savings in bank accounts are losing money.

Compared to April, the bank loans granted to individuals and corporate clients in Romania increased by 0.4 percent in May, to RON 257.5 billion (EUR 54.2 billion), central bank data show.

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Households seem to be more interested than companies in taking loans.

Bank loans in RON granted to individuals rose by 1.3 percent month-on-month and by 14.5 percent year-on-year in May, up to a fresh all-time high of RON 99.9 billion (EUR 21 billion).

But companies slightly reduced their RON borrowings in May by 0.03 percent month-on-month to RON 70.7 billion.

During the last year (May 2018 – May 2019), forex-denominated loans rose by 3 percent to RON 86.9 billion-forex equivalent but the growth rate is much slower if calculated in EUR due to the steep depreciation of the Romanian currency this year – by close to 2 percent.

During the last couple of years, Romania’s bank clients increased their creditor status against banks due to strong savings and weak credit market, deposit holders being technically the banks’ creditors.

In May, bank deposits exceeded loans by 31 percent.

Almost 4 out of 10 Romanians (39 percent) have no savings and are forced to cut spending or borrow money from friends or family, an ING international study recently showed.

In Europe, more than one in four (27 percent) people say their household has no funds put aside. The shares are similar in Australia and the USA.