Bank deposits could be affected by the digital euro


Morgan Stanley Analysts say a digital euro could prevent consumer deposits from euro area banks from falling 8 percent. Reuters writes.

The news comes as the European Central Bank (ECB) is likely to push research on a digital euro in the coming months. And the analysts say the amount could be higher in some of the bloc’s smaller countries.

Analysts based their predictions on a hypothetical “bear fall” scenario in which euro area citizens over 15 years of age transferred € 3,000 or $ 3,637 to a digital wallet. In this case, the analysts found that the amount of the deposits could potentially be reduced by 873 billion euros or 8 percent.

And the average loan-to-deposit ratio would increase from 97 percent to 105 percent.

The analysts said this change will be barely noticeable in the larger markets. But smaller ones, including Latvia, Lithuania, Estonia, Slovakia, Slovenia and Greece, would have a bigger impact – the report finds that converting 3,000 euros in these countries represents a conversion of 17 to 30 percent of total deposits and 22 to 51 percent of total household deposits.

That probably wouldn’t happen, however, as people likely wouldn’t convert more than about 12 percent of their deposits, as much as the € 3,000 euro area combined.

In Greece, too, analysts consider it unlikely that the digital euro could have an impact of more than 10 percent.

PYMNTS recently reported that the ECB said a digital version of the currency could boost the euro’s reputation. It could potentially improve consumer solvency or contribute to savings.

Use of the euro has been declining for years, the report said, and COVID-19 has only accelerated the problem.

However, there could also be risks in the form of more crime from digital currencies such as money laundering.



About the course: The AI ​​In Focus: The Bank Technology Roadmap is a research- and interview-based report examining how banks are using artificial intelligence and other advanced computer systems to improve credit risk management and other aspects of their business. The playbook is based on a survey of 100 bank managers and is part of a larger series evaluating the potential of AI in finance, healthcare and other sectors.

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