Starting in November, OP will start paying deposit interest on the deposits in the current accounts of its owner-customers.
Finland the largest banking group OP starts paying interest again on the deposits in the current accounts of its owner-customers.
OP says that from the beginning of November, it will start paying 0.25 percent interest to the current accounts of its owner-customers. Currently, the deposit rate is 0 percent for all the bank’s customers.
According to OP, the matter concerns 1.9 million company customers, whose current accounts have a total of 20.7 billion euros in deposits. Annually, an interest rate of 0.25 percent would therefore mean interest payments of more than 50 million euros. About 90 percent of the funds in OP’s current accounts are held by owner-customers.
According to OP, the current account deposit interest is calculated based on the current account’s lowest balance in the calendar month. Interest is paid to customers once a year, for the year 2023, either in December 2023 or January 2024.
OP’s director general Timo Ritakallion according to the background of the decision is that OP is ultimately owned by its owner-customers and the company’s result has improved strongly as the general interest level has risen.
“The level of market interest rates has stabilized at a clearly higher level and we have seen a strong strengthening of our own results month after month. Those are the two main reasons for the decision,” Ritakallio tells HS.
Ritakallio says that she believes that the current account deposit rate will remain at the decided 0.25 percent for the time being.
“Of course, interest has already been paid on savings and investment accounts, and there the interest can be over three percent.”
Ritakallio calls OP’s decision a major breakthrough and reminds that the bank’s market share in Finland is almost 40 percent.
“It certainly brings a little more sparkle to this theme,” says Ritakallio.
OP’s the competitors are at least not yet responding to the market leader’s opening. However, Nordea is told that the bank is considering “updates” to the interest rates on its accounts.
“Regarding deposit interest rates, we constantly monitor the competitive and market situation and act accordingly. As a result of the ECB’s latest decision to raise interest rates, we are currently working on updates to our account interest rates,” says Nordea’s head of personal customer business Jani Eloranta in an email message.
Nordea recommends that its customers keep only the funds necessary for everyday needs in current accounts and says that it offers its customers both savings accounts and fixed-term accounts if the customer wants to receive interest on their funds.
Danske Bank also urges its customers to ensure that they do not keep too large an amount in the current account and to keep only the amount of money needed for purchases and invoices in the current account.
The bank recommends the customer to invest funds if there is an amount corresponding to four months’ expenses in total in the deposits.
“For reasons of competition law, we do not take a position on our own future pricing, nor do we speculate on the industry’s general pricing. Of course, we also closely monitor our competitors and want to make sure that the customer gets the best package from us,” says Danske Bank’s communication.
For current accounts in addition to the interest to be paid, OP says that it will pay the bonuses accrued from 2023 increased by 30 percent.
“Furthermore, we have decided that we will not charge our owner-customers any fees related to daily banking services for the period between October 2023 and March 2024. The combined annual value of these additional benefits for our owner-customers is more than EUR 100 million,” says OP Group’s business director responsible for retail banking Harri Nummela in the company’s announcement.
According to statistics maintained by the Bank of Finland, OP Group’s market share of deposits from Finland other than financial institutions was 38 percent in April. OP’s market share was roughly at the same level in housing and business loans as well.
In terms of market share, the second largest bank in Finland is Nordea with a market share of about 30 percent, while the third largest is Danske Bank with a market share of about 10 percent.
Correction August 14, 2023 at 12:18 p.m.: It was previously stated incorrectly in the story that about 90 percent of OP’s customers are owner-customers. In reality, about 90 percent of the funds in OP’s current accounts are held by owner-customers.
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