The European Central Bank has recently signaled a bold shift in public communication about its monetary policy. In recent weeks the bank has publicly explained its approach to financial assets and the implications of higher rates, aiming to clarify who bears the cost of these moves for banks in countries with slower economic progress. Christine Lagarde, the ECB president, addressed viewers during a first interview on Spanish television on Antena 3 last Thursday, inviting citizens to engage with their banks about the changes.
The choice of this scenario matters. Lagarde is using media appearances across various euro area countries to bring the ECB’s actions closer to ordinary people. The central goal is to explain why rate increases are necessary to combat inflation, which can rise the cost of credit, particularly for mortgages. While monetary tightening can positively affect households through higher savings returns, benefits are not distributed evenly across all member states of the union.
Bank customers are encouraged to speak with their bankers, and bankers should respond thoughtfully to retain customers. The option to switch banks remains available in many countries, and most people can switch with relative ease. Lagarde recalled her own experience as a former finance minister when she urged banks to show interest in customers by maintaining deposit sustainability while not forgetting to return deposits. She noted that such conversations have occurred in several European countries, though not as prominently in Spain.
update fee
Lagarde initiated a similar message in another interview with an Indian newspaper. The ECB vice president, former minister Luis de Guindos, echoed these sentiments. Last September, during an event in Valladolid, Lagarde encouraged savers with checking accounts or time deposits to ask their banks about potential updates to fees. More recently, in an interview on Onda Cero, he argued that fee increases are likely sooner or later, driven by the ECB pulling liquidity from the market.
The central bank seeks deposits to bear a greater share of funding costs so the objective of cooling inflation can be pursued. Higher rates can slow the economy, reducing demand. That twofold effect means borrowing becomes more expensive for companies and households, while the value of savings rises to promote prudence over impulsive spending or investment.
more profitability
Despite these messages, Spanish banking stakeholders expressed surprise and concern. The central bank’s governance area, independent from monetary policy, urges institutions to pursue profitability to ensure solvency and sustainability. Andrea Enria noted last month that the industry faces a crisis amid rising interest rates and accelerating digital transformation, along with intensified competition. He warned that stronger deposit competition could worsen financing challenges.
There is some debate within the sector about whether to increase or maintain deposit payments. The reputation of the industry remains generally positive, yet firms argue for margin growth to support profits. The prevailing scenario today is higher interest rates, a trend aligned with the ECB’s withdrawal of liquidity, roughly a year after the industry had anticipated it.