With the interest rates recording a historical jump of about 6 percent during the past period, it seems that increasing the cost of attracting deposits will not be the only challenge that banks will face in the coming period.
As a matter of cost, it was also noted that the exorbitant interest started on banks a new payment window that was not classified in their accounts, at least since 2008, when the interest trends began to change globally by reducing them to rates close to zero in some countries.
Banking, the rise in interest to historical levels motivated a segment of customers to reduce the level of their liquidity available in current accounts and re-absorb it in deposits, in an effort for them to benefit from the attractive interest, and from here the story begins.
According to banking information, there are about 3 million current accounts in Kuwait, which constitute one of the contemporary banking operations, and fall within the custom of banks under the name of the deposit of sums deposited by their owners in banks with the intention of being present for circulation, and withdrawing at the moment of need and upon request, without depending on no prior notification of any kind.
Of course, among the holders of these accounts are those who have one account and those who have more than one account, whether in the same bank or in several banks, bearing in mind that these accounts include prize accounts, children’s accounts, and other accounts that are quiet in terms of withdrawing from them.
In addition, responsible sources revealed to Al-Rai that the value of the sums deposited in current accounts is approximately 12 billion dinars, which is one of the components of the deposit portfolio disclosed within the Central Bank of Kuwait data, which is estimated at 47 billion dinars, explaining that these sums were deposited in banks for free without being offset by any interest paid by banks to the customer.
The sources pointed out that with the rise in interest rates to historical levels, banks noticed that something had changed in the behavior of customers, specifically those with full current accounts, as it was clear that the high interest encouraged them to approve a migration for their money by investing it in savings vessels, benefiting from the upward movement of interest on their money. Especially since expectations indicate that the opportunities available to them to invest their money outside banking vessels will continue to dwindle.
The sources revealed that banks recorded during the last period significant activity from their customers in transferring the majority of their money from their current accounts to others classified as high-return deposit accounts, explaining that these movements will not affect the banks, but they increase the cost of funds on them, as they are likely to open the appetite of customers to further expand this circle, especially since the discount rate has increased since last March until now by 2.5 percent, while this move will further fuel the tendency of interest trends to rise further, which is likely globally and locally.
