Inconvenient Retail Depositors of the Euro Area Credit Institutions — Who Are they?

Abstract

Abstract-This paper presents the determinants of the Eurozone households' willingness to possess high value deposits, against the background of post-crisis funding stability regulations for the European Union (EU) credit institutions.The EU Credit Institutions are required to improve the stability of their funding through household deposits' accumulation. However, new supervisory norms -Liquidity Coverage Ratio and Net Stable Funding Ratio -perceive the deposits above EUR 500,000 as less stable and discourage the entities to accept them. This solution may rise a question about the profiles of individuals who provide funding and inefficiently influence the reported liquidity of credit institutions.The aim of this study is to identify the euro area models of households providing large deposits to credit institutions in 9 member states.On the basis of logistic regression models certain supranational characteristics, which boost the probability of deposit possession (wealth and socio-demographic) are recognised.The study is based on household-level data provided by the Eurosystem Household Finance and Consumption Survey.Index Terms-High value household deposits, funding stability, credit institutions, liquidity standards. I. INTRODUCTIONThe European Union (EU) single, post-crisis regulations for credit institutions 1 actively encourage a shift back to traditional sources of funding based on household deposits. Under the standards: Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) included in the package CRD IV/CRR (Directive 2013/36/EU [1]; Regulation (EU) No. 575/2013 [2]), the entities are required to prove the stability of their funding, leveraging an almost total potential of household deposits in the ratios' calculations. However, the new standards favour deposits with precise features, one of which is their value not exceeding the threshold of EUR 500,000. According to the regulations, surpassing this limit makes deposits more vulnerable, i.e. less useful for the fulfilment of the funding requirements. Precise description of stable and less stable household deposits during periods of stress is presented in delegated act of the European K. K. Kochaniak is with Cracow University of Economics, Cracow, Poland (e-mail: katarzyna.kochaniak@uek.krakow.pl).1 Any institution that is either (1) an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credit for its own account, or (2) an undertaking or any other legal person, other than those under (1), which issues means of payment in the form of electronic money. Commission (EC) [3].The aim of this paper is to identify the profiles of households who provide high value deposits 2 for credit institutions in the euro area. It recognises the features boosting the probability of large deposit possession within the populations of 9 countries. The study is conducted on household-level data from the Eurosystem Household Finance and Consumption Survey (HFCS) 3 . Not all member states met the criteria to enter t...