Finnish households now placing money in investment accounts
Finns’ interest in saving has not abated. Given their stable financial situation and benign developments on the pay and inflation front, many Finns are left with money to put aside after spending.
However, the instability of financial markets and the competing interest rate market have led Finnish households to place their money in various kinds of investment accounts.
A new record was set in December, when the euro savings of Finnish households increased by 13.4 per cent compared with those recorded 12 months earlier.
According to the Bank of Finland, the growth was more rapid than ever before over the current millennium. Moreover, the trend has continued, and in January the funds in deposit were already EUR 66 billion, which is around 14 per cent more than 12 months earlier.
The most popular form of saving in Finland is still an account held with a bank, and the proportion of persons saving in a savings or investment account is now larger than the proportion of persons saving in a current account.
In fact, savings and investment accounts are now considered more attractive assets than mutual funds, while Finns have also learned that it is not worthwhile to keep money in practically non-interest-bearing current accounts.
Apart from uncertainty, another reason for the new trend is the fact that some "new players" have appeared in the Finnish banking sector, according to the Bank of Finland.
The discreet wording refers mainly to Icelandic banks which upset traditional banking circles with their aggressive 5% interest rate offers.
As a consequence of these offers, Markku Pohjola, the Chair of the Federation of Finnish Financial Services, suggested that such banks are likely to head towards bankruptcy.
In addition to the chairmanship, Markku Pohjola is also the Deputy CEO of Nordea Bank, one of the banks challenged, which might go some way towards explaining his opinion.
In 2007, the share of bank deposits grew briskly in almost all banks operating in Finland.
The phenomenon appears to be Nordic, as most of the foreign banks in Finland are Nordic.
According to a survey conducted by Helsingin Sanomat, only the Swedish bank Handelsbanken saw a decline in deposits last year, and this did not cover households. In that department, Handelsbanken recorded an 18% increase in deposits made last year.
Meanwhile, all of the other 11 banks involved in the comparison posted an average growth of 16 per cent. When these figures are combined, the growth in deposits comes to 12 per cent.
Apparently, the aggressive launches and high interest rate offers were most beneficial to small banks.
For example, one of the banks offering an interest rate of 5% was Iceland’s Kaupthing Bank, which almost doubled the size of its deposits over 12 months.
Bank of Finland
Federation of Finnish Financial Services