Europe’s Lenders See ‘Bank Walk’ as Consumers Pull Savings

European consumers are reportedly pulling their savings from bank accounts as they seek better deals.

As Reuters reported Thursday (May 4), this phenomenon has emerged as some of Europe’s largest banks reported a profitable start to the year while also noting the “bank walk” trend, a slow-yet-still-noteworthy outflow of funds.

The report notes that most banks have been slow to increase the deposit rates paid to customers, a move that has raised their profits but left consumers frustrated.

“Traditional banks need to decide whether to maximize their return by keeping rates on deposits as low as possible, or to prioritize their liquidity and stability by increasing rates and retaining customers’ funds,” Nicola Marinelli, assistant professor of finance at Regent’s University London, told Reuters.

According to the report, money market funds have become a popular place for consumers to move their cash amid ongoing inflation.

That trend mirrors one seen in the U.S. in the wake of the banking crisis in March, with investors moving $508 billion into those funds in the first quarter of the year. It was the largest amount transferred to such accounts since the start of the pandemic, bringing the money market funds to a record $5.2 trillion.

The Reuters report said more than $37 billion flowed into European money market funds in March alone, per data from Refinitiv Lipper.

Among banks seeing a loss of deposits were NatWest in the U.K., where customers pulled nearly $14 billion in the first quarter of 2023, and HSBC, where deposits — excluding one-time inflows — fell by $10 billion to $1.6 trillion.

HSBC CEO Noel Quinn said this loss was “nothing significant,” while Standard Chartered finance chief Andy Halford told Reuters he believed consumers would, in the end, choose security over interest payouts.

“We will see people parking their money where it is safe,” he said.

But as PYMNTS noted earlier this week, it isn’t safe to assume that bigger banks are always going to be safer.

While the response to the rapid-fire downfalls of Silicon Valley Bank, Signature Bank and First Republic Bank — the last purchased earlier this week by JPMorgan Chase — have underlined the overall strength of the banking system, the question remains: who’ll step in next time?

“JPMorgan is unlikely to keep entering the fray to scoop up smaller players, and there’s no guarantee that we’ll see consortiums of private equity and investor groups banding together, as we saw during the last crisis with, say, IndyMac,” PYMNTS wrote.