Banks are already demanding higher interest rates for loans, but are not in a hurry to raise them for savings, and Lithuanian financial regulators point out that this is not correct, writes Lithuanian public media LRT.
The European Central Bank raised interest rates four times last year, and commercial banks raised their customers’ payments accordingly. Mortgage loan interest rates have increased to 4%, while consumer loan rates have increased to 9%. Meanwhile, depositors have not noticed that interest rates on deposits are rising.
The Bank of Lithuania stated that the profit from deposits should be higher. Its manager, Gediminas Šimkus, said that interest rates on deposits are lagging behind. Algirdas Butkevičius, an opposition MP, deputy chairman of the parliamentary Budget and Finance Commission, was even stricter and promised a parliamentary investigation. He said:
«This behaviour of commercial banks is, to say the least, obscene, and if we look at it financially and economically, it is predatory. As far as I know, the semi-annual profits of commercial banks have only increased.»
The Bank of Lithuania states that it has already invited commercial banks to review their approach.
Some economists point out that there is no need for large commercial banks to increase interest rates on deposits. Economist Aleksandras Izgorodinas pointed out: «Currently, banks do not need to get additional money to prepare for a crisis, to stabilize finances or to increase capital. The second is that, since some kind of crisis awaits Europe and Lithuania, banks will accordingly lend less to both businessmen and private individuals. Which also means that banks do not need to increase their capital.»
Simonas Krėpšta, a member of the board of the Bank of Lithuania, points out that the competition will do its job, and it can already be observed that the smaller banks offer 1-2% rates for deposits.
General Financing bank CFO Valdas Bernatavičius said: «Term deposit interest rates are rising, but they cannot keep up with European Central Bank interest rates, and this is normal, as deposit interest rates are determined by supply and demand.»
The Bank of Lithuania invites depositors to transfer funds to deposit accounts, as this may help improve the situation.
Read full article here: https://www.lrt.lt/en/news-in-english/19/1861241/this-is-obscene-lithuanian-regulators-urge-banks-to-close-rate-gap-between-loans-and-deposits
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