Banks are not comfortable with deposit prices … "Price has increased our cost"

Banks are seeking to persuade the Central Bank of Kuwait to give up the price range it insists on setting it between deposit interest and lending, which has been at a price level for some time, while banks are looking to increase this margin to their advantage.
The sources said that banks have suffered a decline in loan growth rates since last year, whether they are for individuals or businesses, in return for the continued rise in deposit activity, which has had a negative impact on earnings, which explains the rise in interest rates on redemptions or repurchase agreements with banks. A quarter of a percentage point, unless this reduces the cost of interest rate increases on new or renewable deposits, whether they are governmental or personal.
The sources said cash managers had discussed the persistent impact of high deposit rates over the recent period, their relationship with discount rates and their margins on margins. Banks' interest, indicating that there was a consensus on the importance of the proposal for the Central Bank to widen the pricing margin between deposits and loans to more than one. price, the burden of surpluses at a time when banks are facing an influx of cash.
The sources pointed out that the Central Bank insists on the need for the banks to respect the pricing instructions and that they must raise the prices they provide on their deposits, whether they are governmental or personal , in a balanced way with the prices offered on its instruments. The bank that violates these instructions will be subject to the possibility of not benefiting from it. The repurchase of public debt securities as a punitive measure.
Sources said the current banking consensus was to let price point pricing be replaced by the equation of supply and demand on the basis that the prices offered by banks on the deposits of the clientele vary by bank, as required, and that banks will have to offer low prices based on their plans through customer deposits, and alignment on the new price list in response to fierce competition who opposes them.
According to a recent report from Kuwait Finance House on the growth of deposits in the banking system, total deposits in July rose 3.9% year-on-year to reach KD 43.1 billion. Banks posted a profit of 36.3 billion KD in July, 2.5% more than banks.
According to the report, the annual increase in local currency deposits to the private sector amounted to 1.6 billion dinars, depending on the terms and types, private sector deposits increased by 5, 8%, while the general government decreased by 5%.
The sources pointed out that this gives this most appropriate proposal of the great recession that characterizes interbank transactions "Interbanking, considering that not all banks need to borrow on this market because the first, which leads to very low withdrawal rates and has no significant contribution to reducing the level of withdrawal. Surpluses that increase every day.
Some officials have suggested that linking deposits and loans to a one-time price margin would reduce the banks 'profit ceiling relative to the loan portfolio, since banks' return by increasing the repo rate would be reduced by the higher monetary cost. high that they could bear the rise in the prices of deposits.
In terms of accounting, it is not possible to compare the volume of pension arrangements put in place by banks with their deposit base, the first case being linked to necessity and the short term, unlike long-term deposits. customer daily, which increases the pressure on the profitability of banks operating, one side and not bilaterally as usual, in terms of deposits and loans.
They added that the banks covered the difference between the cost of additional funds and the financing receipts, the discount rate on loans having stabilized, while the local economic situation had not experienced noticeable improvement in terms of increased public spending or business turnaround, as well as an increase in operations requiring credit expansion.
On the other hand, some support the tendency to control banks to balance the prices of deposits and loans, for example, the gains made by banks on public deposits vary, notably by contributing to the management of their maturity and their regulation. liquidity. Raise the deposit ceiling, which makes the interest rate higher than others and sometimes generates excess demand and yield.
The sources pointed out that the dinar is an attractive tool for local savings and that banks will continue to refinance it to offset withdrawals, with the aim of redirecting these funds to personal or business financing, or even to finance major development projects. , Which is expected to grow faster in the future, particularly in the petroleum and housing sectors.
Sources indicated that the regulatory guidance in this regard reinforced the attractiveness of the deposit, which would help reduce cash flow in the market, including current account funds and the conversion into cash registers. savings to further curb inflation. Absorb the rise in interest rates on dinar deposits in light of current interest rates on loans and credit facilities provided by.