The Heterogeneity of the Eurozone Populations in Deposits’ Possession and Its Implications for Credit Institutions’ Funding Stability

Abstract

The European Union single liquidity standards - Liquidity Coverage Ratio and Net Stable Funding Ratio – point out household deposits as preferred, stable funding for credit institutions, under normal and stress conditions. The introduction of standards affects not only funding stability of entities, but also their future development opportunities. In countries with populations of low propensity to hold deposits this impact is expected to be negative. The implementation of common standards in a group of diverse countries of the Eurozone seems to be a task of compromised effectiveness. During the last financial and economic crises individual populations were unequally capable to place deposits with credit institutions, leading to significant differences in their average levels per capita in the member states. The aim of this paper is to identify the determinants of the Eurozone’s geographic disparities in the populations’ ability to provide deposits to domestic credit institutions, in selected years: 2006, 2008 and 2012. The indicated periods refer to significantly different macroeconomic background. The results of empirical analysis demonstrate the priority impact of precise variables, referred to the financial market and national economies on the formation of the levels of household deposits per capita in the Euro area. The variables representing household features appear as less important for the considered problem.