Filipe Grilo: “There may be some fear of financial instability in small banks”.


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The economist and professor at Porto Business School considers the decision to reduce the interest rate on savings certificates to be “political suicide”, which he justifies as a means of preventing the flight of deposits from small institutions.

The Series F Savings Certificates, available since the 5th, offer an interest rate of 2.5%, one percentage point lower than the previous edition, but also more modest permanence premiums and longer maturities. Nevertheless, this is an interesting savings instrument in view of the availability of capital-guaranteed products in the domestic banking sector, which has in the meantime announced term deposits with higher interest rates than hitherto. Economist and Porto Business School professor Filipe Grilo spoke to Diaro de Noticias about the government’s motivation to change the conditions of the E series, financial education in Portugal and other investment options.

Are the changes in savings certificate conditions, with the launch of the F series, a brake on middle-class savings?

Lower interest rates discourage savings. And it’s not just the lower interest rate, but also the lower retention premium and longer duration that make the product much less attractive. The middle class managed to save during theNOTovid period and this enabled them to accumulate an attractive cushion, which is used to repay their loans, which are more expensive, but also to invest in savings certificates. Initially, savings were invested more in T-bills, which offered a higher yield, but then, with the reversal of monetary policy, savings certificates became more relevant and people migrated from one product to the other.

What is your analysis of the reasons that led the government to make these changes? Was it the fear of jeopardizing the financial health of the banks, with a flight of deposits to savings certificates?

For me, what’s happening is that the decision, in political terms, makes no sense; it’s a kind of political suicide. The argument used by the Debt Management Institute, namely that we’ll save money on debt management, doesn’t make sense either. To the letter, it’s true, i.e. the Portuguese state will save money. But politically, it’s harder to sell this idea, because Portugal doesn’t need the money. The country will save, at most and with very conservative calculations, 160 million euros, which is not huge if you compare it, for example, to the extraordinary increase in pensions, which amounted to one billion euros. The real reason is deposits, but not those of the big banks. In recent years, the big banks have had access to what is known as quantitative easing. The European Central Bank has bought debt securities from them, so that the big banks are now flush with cash. This is why interest rates on deposits are not rising much. The problem lies with small and medium-sized banks, which have not had access to quantitative easing and are much more dependent on deposits. And as soon as the migration from deposits to savings certificates begins, these banks start to tremble.

Is this fear the reason for this change?

I think it’s what’s driving the government’s decision because, if you look, there are already term deposits that earn more than savings certificates, especially in the smaller banks. One gets the impression that the government decided to reduce the interest rate from 3.5% to 2.5% in order to set a lower interest rate for small bank deposits and a higher rate for large bank deposits.

This analysis lends weight to the criticism that the interview with the Chairman of Banco CTT may have influenced the government’s decision. Do you think it had an impact?

I think, more than that, it’s what happened outside. I still haven’t heard a statement from Mário Centeno [Governor of the Bank of Portugal], or from the Public Finance Council, on this subject. It seems to me that there is perhaps a certain caution in the management of information, precisely because there is perhaps a fear of financial instability in the small banks. But neither the government nor the governor himself can say so, because then they could provoke a run on deposits in these banks and make the problem even worse.

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