Any prolonged period of higher interest rates means that banks must monitor declining deposits carefully, as depositors seek higher-yielding alternatives elsewhere.
Rate increases in the eurozone have changed the balance of liquidity in the market, with liquidity left in current accounts during the period of negative rates starting to be used in other products, including term deposits, savings accounts with better rates, money market funds and life insurance.
“While term deposits and savings accounts are in the bank balance sheet, funds and insurance are not, which impacts liquidity,” explains Laurent Cote, Crédit Agricole group treasurer.
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