Record decrease in
bank deposits and loans

Demand deposits double

on transfers from long-term accounts

Customer deposits in commercial banks deceased 13 percent to $138 billion at the end of 2020 compared with a year earlier, according to the Central Bank (BDL).

Term deposits decreased by 28 percent. Demand deposits almost doubled driven by conversions from term deposits so that they could be withdrawn immediately, as customers were concerned about a further deterioration of the foreign exchange rate. According to Amine Awad, CEO of BLOM Bank, the surge in demand deposits could also be partly attributed to sharp declines in interest rates. The average interest rate on dollar deposits fell to 0.94 percent in December 2020 from 4.62 percent a year earlier. The average rate on lira dropped to 2.64 percent from 7.36 percent.


Source: Central Bank, InfoPro

Residents’ lira deposits plunged 29 percent while residents’ foreign currency deposits fell five percent. This has resulted in a dollarization rate of deposits of 80.4 percent, the highest in 28 years, said Marwan Barakat, Head of Research at Bank Audi.


Source: Central Bank, InfoPro

Loans (claims on customers) dropped 27 percent to $36 billion. The decline was mainly driven by a sharp decrease in foreign currency loans. Claims on resident customers in foreign currencies plunged 38 percent to $19 billion. Customers were rushing to settle their dollar loans as they were worried about a devaluation of the official exchange rate, Barakat said. As a result, the dollarization rate of loans decreased to a little less than 60 percent for the first time in 34 years, he said.

According to Awad, the dollarization rates of both deposits and loans are likely to drop in the future. BDL and the banks have stopped selling dollars to depositors who want to convert their lira deposits. Some companies are depositing additional funds in lira to pay their expenses such as dues to the National Social Security Fund although overall lira deposits would continue to fall, he said. The few loans that are being provided by banks are also mainly in lira as customers are apprehensive of a further surge of the dollar, Awad said.