Analysis of recent changes in bank deposits in Spain

Bank deposits are the traditional source of funding for commercial banks, whose business is to raise funds from the public and channel them to other sectors (intermediation). Deposits therefore make up a significant part of bank liabilities, particularly in Spain where commercial banking predominates over investment banking. This traditional business of raising deposits from the public is a retail banking activity (characterised by a large number of relatively small customers) as distinct from wholesale banking where each customer provides a large amount of funds, usually through financial market transactions (securities issuance, interbank funding, etc.). This different customer profile means that the funds raised behave differently and have different characteristics. Thus retail deposits, even if they are short-term or even sight deposits, tend to show highly stable behaviour. This derives, on the one hand, from the aggregation of numerous agents with different liquidity needs and, on the other, from the guarantees provided by third parties (deposit guarantee fund) which do not exist for wholesale deposits. In practice, however, not all bank deposits fit the classical definition of retail liabilities. Interbank deposits are the most obvious example: they are clearly wholesale funding and in crisis situations such as the present one they are significantly more volatile than traditional retail deposits. General government deposits, whose relative weight is comparatively small (1.8 % of total liabilities in July 2012), also have their own specific behaviour, which is generally determined by other factors than those affecting households and nonfinancial corporations. And even in other deposits, i.e. those classified under the “Other sectors” heading (that is, other than monetary financial institutions and general government), it is necessary to distinguish between the various groups of agents in order to assess their behaviour properly. This is because the “Other sectors” group as defined for statistical analysis purposes is highly heterogeneous, since it includes, apart from households and non-financial corporations, central counterparties, insurance corporations and pension funds, investment funds, financial vehicle corporations (securitisation SPVs), preference share issuers, securities brokers and dealers and other financial intermediaries or auxiliaries. In Spain there are basically two statistical sources of data on bank deposits: financial statements harmonised at euro area level (EMU returns) which institutions submit regularly to the Banco de España (BE) and supervisory returns. This article analyses the former. The EMU returns show that the total deposits of other resident and non-resident sectors with Spanish monetary financial institutions (MFIs) amounted to €1,540 billion in July 2012, representing 42 % of the total liabilities of these institutions. Chart 1 shows that these deposits grew continuously during the expansionary phase of the Spanish economy and in the early stages of the crisis that erupted in 2007. Only from June 2011 did a decline begin, which seems to have quickened somewhat in recent months. Between June 2011 and July 2012 the decrease was €291 billion (16 %). However, the fall in deposits of households and non-financial corporations resident in Spain (which constitute what are traditionally known as resident retail deposits) was substantially smaller (€76 billion in the same period, or 8 % with respect to the mid-2011 level). The remainder relates to a variety of deposits, most of which are essentially wholesale deposits, on occasions rather unique, and which, accordingly, should be analysed separately. It is worth mentioning here that the European Central Bank (ECB), within the framework of its “monetary analysis” (the former “Pillar 1” of its monetary strategy), also disseminates on its website an indicator of deposits in Spain and in the other euro area countries. This indicator, which has drawn some attention from analysts and is very similar to that considered here, recorded a balance as at July 2012 of €1,509 billion, with a fall from June 2011 of €233 billion. The differences between the two are basically that the ECB indicator includes only those deposits in which the counterparty is an agent resident in the euro area (instead of those of residents all over the world), and that these deposits also include noncentral government deposits, the justification here being that this is the money-holding sector defined in Eurosystem statistics. The rest of the article is structured as follows: Section 2 analyses the deposits of other resident and non-resident sectors other than Spanish households and non-financial corporations, which are examined in Section 3, and Section 4 summarises the main conclusions drawn.