Hungarians slowly forget that term deposits exist

As the chart below attests, deposits with an agreed maturity of up to a year and over have become less popular in the retail business of Hungarian banks. According to a report released by the National Bank of Hungary (MNB) on Friday, only 44% of their account balances kept as term deposits, 37% in HUF and 7% in other currencies. The rest of their balances as much as 56% are just hanging in the air hoping a better time to come.

This must not be a coincidence as:

• deposits with an agreed maturity of over a year have never been popular;
• the interest rate on deposits with an agreed maturity of less than one year was a mere 0.56%, according to June data;
• their interest rate was 3.8% three years ago and 9.2% (!) seven years ago on average.

Deposits are less and less considered as a type of investment by Hungarians, rather they keep money in government bonds, especially the interest-bearing treasury bills (annual interest is 2.25% at present), which are already gaining market share even at the expense of investment funds.

The importance of bank deposits, however, is increasing in money circulation as a payment instrument. They are no longer function as a form of savings rather a liquid asset regularly converted into consumption (quasi cash).

• Tags:
• economy,
• deposit,
• banking system