Deposits of domestic non-banks

Since the mid-1990s there has been a marked decline in the importance of the banks’ traditional source of funding: deposits held by domestic non-banks. This holds true despite the fact that a lack of other attractive forms of investment have caused deposits to pick up again somewhat in recent years.

Year-end 2004   Change since year-end 1999     € bn   as % of balance sheet total   € bn   % p.a.   Deposits of domestic non-banks   2,200.0   33.0   + 297.5   + 3.0   Deposits of enterprises   762.3   11.4   + 168.1   + 5.1   Deposits of individuals   1,288.6   19.3   + 145.8   + 2.4   Deposits of non- profit institutions   45.6   0.7   + 0,5   + 2,1   Deposits of public authorities   103.6   1.6   - 16.9   - 2.9

Source: Deutsche Bundesbank

Individuals, in particular, are turning to other forms of investment. A growing number of depositors now entrust their savings to institutional investors, such as insurance companies and investment trusts, or purchase shares and bonds direct. This is a sign of Germany’s ongoing development as a financial centre and is, as such, to be welcomed in principle. For the banks, on the other hand, the trend has resulted in significantly higher funding costs and is changing the pattern of refinancing activities.

One reason for the above-average rise in the deposits held by enterprises is that the bank statistics class investment funds and insurance companies as non-banks. As their business expands, they need to hold more short-term deposits with the banks to ensure they have sufficient liquidity at all times.