Higher rate difference does not benefit time deposits

Statistical News Release
Date 26 April 2013

Dutch households held EUR 7 billion less savings in the form of fixed-term deposits in March of this year than one year earlier. During that period, the average rate difference between a time deposit and a sight account increased by 0.5 percentage point. The rate difference failed to persuade households to tie up savings for a set period.

At end-March 2013, Dutch households held some EUR 328 billion in savings accounts with Dutch banks, approximately 4.2% more than a year before. Most of those savings (EUR 281 billion) are held in sight accounts, usually linked to a payment account, while some EUR 47 billion is held in the form of time deposits. Time deposits have a fixed maturity date and bring in interest at rates that are generally a bit above the rates paid on sight deposits. Most Dutch household savings held in fixed-maturity time deposits are tied up for several years: as at end-March 2013, almost 80% had maturities of above two years.

Time deposits as a share of total Dutch household savings, and rate difference between sight and time deposits

The proportion of Dutch household savings held in time deposits decreased from 17.5% in September 2012 to 14.4% in March 2013. In March 2013, the Dutch held almost EUR 7 billion less savings in fixed-term deposits than they did a year earlier.
One factor that may affect the relative size of time deposits and sight deposits is the difference between the interest rates received on each. The difference between the rate on time deposits and that on sight deposit has increased steadily since mid-2012. At end-February 2013, the average rate on time deposits was about 1.7 percentage point higher, the largest difference recorded in over three years' time. Yet the increasing difference has not been reflected in the amount of savings the Dutch set aside in time deposits. 

Figures can be found in Tables 5.2.6 and 5.2.7 on the page 'Domestic mfi statistics (monetary)'.