You have to remove excess cash. Banks have more liquid funds than necessary

The excess of the Polish banking sector is characterized by the fact that banks have more liquid funds than necessary, which forces the interventions of a central bank in order to attract excess cash from the market – the Polish Economic Institute (PI) said on Thursday.

According to PI, the key cause of this state is the faster increase in deposits compared to the increase in loans granted, reflecting Poles' preferences to save and low demand for credit from companies.

It has been added that despite the central bank's activities, such as the issue of cash bills, excess liquidity remains a challenge. The solution could be a change in the investment habits of Polesconsisting in greater use of loans and redirecting savings from deposits to the capital market, which would help in the absorption of free funds and reduce permanent excessness in the system.

Pie announced that in 2024 the liquidity of the banking sector in Poland, measured as the average monthly balance of operations carried out by the Central Bank, amounted to PLN 325.641 billion, which is an increase of PLN 42.341 billion.

According to Pie, a decrease in loan ratio to deposits is observed in the Polish banking sector. The main reason is the fact that the value of deposits in banks increases much faster (by 12.3 % year -on -year) than the value of loans granted (increase by 4.9 percent year -on -year).

Poles still show a great tendency to save and prefer to place funds on bank deposits compared to other forms of investing. This contributes to the rapid growth of the deposit base.

According to PI, limited demand for credit from companies is visible, because companies significantly use funding from their own funds, without having to use a bank loan.

According to Pie, the value of loans for the non -financial sector, expressed as a percentage of GDP, remains low compared to other European countries. At the end of 2024 in Poland it amounted to 33.9 percent, while in the euro area the same value reached 79.4 percent. It has been added that although a mortgage granted to households remains a more popular form of financing, this is not sufficient to balance excess liquidity. (PAP)

pif/ malk/