BERLIN, Germany: Reuters has reported that despite potentially higher interest rates, Germans are placing fewer deposits abroad, due to fears of a financial crisis after the collapse of Silicon Valley Bank in the US.
German households have Europe's highest cash deposits, at 2 trillion euros, with many opening deposits online at small banks in weaker economies, such as Lithuania, Malta, Italy and Portugal, seeking higher returns on their cash.
However, data provided by two German comparison websites, Check24 and Biallo, showed that this trend stopped on 10th March after the collapse of Silicon Valley Bank sparked turmoil in the banking sector.
According to data from online platforms, demand for foreign deposits with a fixed maturity dropped by 15 to 20 percent since 10th March, compared to February.
Subsequently, German banks, which are considered safer because of Germany's high credit rating and two separate safety nets on deposits, witnessed an increase in deposits, the platforms added.
In an interview with Reuters, Moritz Felde, a managing director at Check 24, said, "Investor sentiment changed after March 10. I see an increase in demand for banks located in triple-A countries."
Sibylle Miller-Trach of the German consumer association in Bavaria said, "Term deposits are not necessarily safe, and savers should gather information about the creditworthiness of the bank and its country," she told Reuters.
According to the latest offers on major German comparison platforms, Italian investment bank Smart Bank was paying the highest rate on a 12-month deposit at 3.5 percent, followed by Malta's Izola Banka and Croatia's Banka Kovanika at 3.45 percent.
By comparison, the best offer by a German bank was 2.55 percent from online lender SWK Bank.
"The current crisis is leading customers to keep their deposits with their local bank," added Christian van Beek, director at the Scope Ratings agency, as reported by Reuters.