Why the French Are Saving More and More Money in Their Bank Accounts

For the first time since the summer of 2022, the amount of money sitting idle in individuals' checking accounts began to rise slightly in the second quarter, according to data released on August 8 by the Banque de France.
 

"The initial (still incomplete) data covering households' main financial investments for the second quarter of 2024 indicate, in particular, that the outflow (negative net flow) from demand deposits has come to a halt," explains the Banque de France in its quarterly report on household savings and wealth. 

After remaining stable just below 550 billion euros between February and May, household demand deposits stood at 554 billion euros in June.
 

This mass of money sitting idle in checking accounts had been growing steadily, as far back as the Banque de France’s public records go (January 2003), peaking at 639 billion euros in the summer of 2022. The rise in interest rates, which was reflected in the main principal-protected savings products (Livret A savings accounts, term deposits, etc.), prompted savers at that time to make better use of this money by investing it in higher-yielding products. 

Bad news for the banks

This is bad news for banks’ profitability: demand deposits are in fact much more lucrative for them, since banks pay little or no interest on them. The average interest rate on demand deposits is 0.07 percent—ten times less than what businesses receive for the same product (and roughly the same total amount outstanding)—and a far cry from the rates charged on loans.
 

Data released Thursday also show a renewed interest among savers in euro-denominated life insurance funds and a shift away from real estate funds, which are facing declines in unit values and withdrawal requests. Household financial assets reached 6,267.6 billion euros in the first quarter, according to the latest available data—a record high.