Larger banks in Estonia offer next to nothing in interest on fixed-term deposit accounts, citing a lack of popularity of such accounts, low interest rates in general, as well as unfavorable conditions on the money markets, though some smaller banks have slightly more appealing rates.
Fixed-term deposit volumes have nonetheless risen, the Bank of Estonia says. Riskier savings and loan associations also offer higher interest rates on deposits.
In some cases, interest rates on fixed-term deposits are zero, with the larger banks.
20% income tax is also due on the payment of fixed-term deposit interest, in any case.
Sweden-owned bank Swedbank grants an interest rate of 0.05% for a one-year deposit term.
Ksenia Ipolitova, Swedbank’s head of savings products, says that deposit accounts are less popular in the current climate, with savers looking to other investment opportunities instead.
SEB Bank, also Sweden-owned, offers fixed-term deposit accounts, but with interest rates of 0%. The bank says this is due to negative interest rates in the money markets. SEB does, however, provide fixed-term deposit accounts for US dollars, with an interest rate of 0.15% over six months.
Estonian bank LHV Pank offers 0.1% interest on annual deposits, which LHV Treasury manager Kadri Haldre says is partly due to general interest rates being low. At the same time, LHV deposit products have proven quite popular, Haldre said, with a growth of 13% YoY, to EUR 573 million, reported in June.
Smaller banks in Estonia can do slightly better in terms of rates.
Inbank offers a higher rate than most, at 1.2% per annum, with Holm Bank, which only entered the market last year, going to 1.15%. Holm has longer-term deposits of EUR 45.3 million at present, it says.
According to the Bank of Estonia, at the end of last year, fixed-term deposits totaled nearly EUR 3.3 billion euros, compared with EUR 2.8 billion a year earlier.
The proportion of fixed term deposits, while much more popular 10 years ago, at 43% of total deposits (EUR 4.5 billion), rose slightly from 15% at the end of 2017 to 17% two years later.
Savings and loan associations offer much higher interest rates, generally 4-8%, though joining these require paying both a connection fee and the required share capital. These deposits are additionally not guaranteed by the state, unlike with the banks. In the event of the association going bankrupt, depositors can lose everything.
For instance, the Tartu Savings and Loan Association (Tartu hoiu-laenuuhistu) requires a joining fee of EUR 10, with a minimum share capital of EUR 35 for a “natural” person and EUR 50 for a “legal” person. Interest stands at 5% per annum, rising to 5.5% for deposits over EUR 2,000 and where the deposit makes up at least 5% of the total share capital.
The Estonian Development Savings and Loan Association (Eesti Arengu hoiu-laenuuhistu) promises interest of up to 12% per annum on a minimum deposit of EUR 1,000 over five years. The association pays out EUR 480 in net income on maturation and charges EUR 6 joining fee plus EUR 30 refundable at the end of the term.
Other instruments include the Guarantee Fund (Tagatisfond) – which guarantees deposits up to EUR 100,000 per depositor with SEB, Swedbank, LHV, Inbank, Bigbank, Coop Pank, Holm, Luminor and TBB, as well as with foreign banks Citadele, Danske, Svenska Handelsbanken and OP Bank are also guaranteed to the same extent.
The Savings and Loan Cooperatives Fund (Hoiu-laenuuhistute fond), which includes five cooperatives, guarantees deposits of up to EUR 20,000. (ERR/Business World Magazine)
