The Bank of Portugal paid banks 1.604 million euros last year in interest on deposits, surpassing the 1.274 million euros paid in 2023.
Banks have been experiencing excess liquidity, meaning they have more deposits than they provide in credit, and they invest this surplus in central banks, earning interest.
Currently, the European Central Bank’s (ECB) deposit rate stands at 2.25%, representing the interest banks receive today for money deposited there. For the year 2024, this remunerative rate averaged 4%.
The Bank of Portugal explained the increase in banks’ earnings from central bank deposits as being due to, on one hand, the rise in these deposits and, on the other hand, the increase in the average interest rate of the deposit facility.
“Interest payable on liabilities to credit institutions amounted to 1.604 million euros and has increased due to the rise in the average volume of these operations in 2024 and the increment in the average interest rate of the deposit facility,” reads the 2024 Board of Directors’ report.
In March, the governor of the Bank of Portugal criticized banks for the low interest rates paid on customer deposits, suggesting that the remuneration they provide to clients for deposits should reflect what they earn when depositing a portion of these funds in the central bank.
“It is not very understandable that there is a significant difference between the remuneration of bank deposits in the central bank and the remuneration of deposits that banks offer to their clients,” said Mário Centeno at the Banking Forum.
At that time, Lusa contacted the main banks to ascertain the gains they achieved in 2024 in this area but received no responses.
The average interest rate on new term deposits for individuals declined in March for the 15th consecutive month to 1.69%, the lowest level since May 2023 and the fourth lowest in the Euro area, according to data from the Bank of Portugal.
