For the last 10 months or so, deposit rates have been on a downward spiral in Ireland.
Irish deposit rates are still well above EU average, but well below the deposit rates in the likes of Cyrus.
What next for Irish deposit rates? Key factors:
(1) Many rates are on hold, in recent weeks, in Irish banks at the moment to help ensure a smooth transition to the post ELG world. i.e. to see how much deposits they loose as a consequence of the removal of ELG deposit insurance on 28 March.
(2) Most Irish banks still have loans to deposit ratios well above a 100% fully funded ratio. There is significant adjustment still required especially in the likes of PTSB. This will keep rates, relatively speaking, high for some time.
(3) ECB emergency liquidity and CBI emergency liquidity is getting repaid at an impressive rate but there is still huge sums to be repaid. This will keep rates, relatively speaking, high for some time.
(4) Unknown potential ripple effect of Cyprus situation.
(5) Aggressive competition for PTSB, KBC and others.
(6) Banks growing desire to increase interest margins.
Bar a resurgence of the Euro crisis, I would think that Irish deposit rate spreads will continue to narrow towards German deposit rates or be it at a more moderate pace. However, it will be many years to come, until we have banks with 100% loans to deposits ratios, no emergency funding and consequentially German style deposit rates.