Savings: Why the French Are the Best Off in Europe

Customers of French banks are better off than their European neighbors in terms of returns on savings and the cost of loans, according to a study of interest rates charged by banks in eurozone countries conducted by the European Central Bank (ECB) and compiled by economist Eric Dor, director of research at the IESEG School of Management.

In February, the average interest rate paid by banks on savings accounts in France was 2.53 percent, which is higher than the European average. French banks also stand out for other savings products, such as term deposits, with an average interest rate of 3.71 percent—one of the highest in the eurozone.

This discrepancy is mainly due to the prevalence of regulated savings accounts in France, particularly the Livret A, whose interest rate rose from 0.5% to 3% between 2022 and 2023. Customers of French banks also benefit from intense competition among the major banking networks in the savings market.

In terms of credit, customers of French banks are also better off. The average interest rate on new mortgage loans in February was the lowest in the eurozone, at 3.51% (excluding insurance costs). For banks’ total outstanding loans, this rate drops to 1.71%, compared with 2.12% in Belgium, 3.13% in Italy, and 4.72% in Portugal.

However, the ECB’s sharp rate hike has impacted the margins of French banks, which have seen their profits decline due to rising costs associated with paying interest on customer deposits and their inability to pass these higher costs on to their loan portfolios. The BPCE Group, one of the largest holders of Livret A savings accounts and a leading lender, saw its profits plummet by 25% last year, with the net interest margin falling by 32% for the Caisse d’Epargne network alone. French banks hope to see their margins recover starting in the second half of 2024.