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Surprising increase in guaranteed savings
statistikk
2008-01-11T10:00:00.000Z
Banking and financial markets
en
orbofbm, Financial corporations, balance sheet, banks, mortgage companies, finance companies, state lending institutions, loans, deposits, financing, mortgages, bonds, commercial papers, shares, ownership interest, assets, liabilities, foreign banks, borrowers, balancesFinancial institutions and other financial corporations, Banking and financial markets
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Financial corporations, balance sheet, November 2007

As from 2016 the statistics is published with Banks and mortgage companies.

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Surprising increase in guaranteed savings

Investments in deposits with index-linked yield increased from October to November, in spite of a long period of negative media coverage of these products.

In October 2007, both investments in guaranteed savings and loans to finance these investments decreased. The decrease was to a certain extent ascribed to increased negative media coverage of guaranteed savings. It was considered likely that this would affect the demand for such products. Preliminary figures for November last year, however, show that investments in guaranteed savings and loans to finance these investments increased slightly.

Guaranteed deposits cause the increase

Bank figures for customer investments in guaranteed savings show total investments amounting to NOK 37 billion to end-November. Deposits with index-linked yield constitute NOK 29.2 billion of the total investments, while index-linked bonds represent the remaining NOK 7.8 billion. Deposits with index-linked yield increased by NOK 1.4 billion from October to November 2007, but decreased by NOK 2 billion compared to November 2006. Investments in index-linked bonds have, with few exceptions, decreased since December 2005. November 2007 is no exception, investments in index-linked bonds decreased by approximately NOK 500 million compared to the previous month, and by NOK 6.3 billion compared to November 2006.

Banks. "Guaranteed" index-linked bonds and deposits with index-linked yield,loans to finance these products, and loan financing shares. November 2006-November 2007
Month Deposits with
index-linked
yield 		   Index-linked
bonds 		Total Loans to finance Loan financing share
   Deposits with
index-linked
yield 		   Index-linked
bonds 		Total    Total    Deposits with
index-linked
yield 		   Index-linked
bonds1
2006:11    31 242 14 021         45 263 17 256 16 041        33 297 74 55  114
2006:12 32 548 13 262 45 810 18 054 15 969 34 023 74 55  120
2007:01 30 066 13 112 43 178 16 213 15 935 32 148 74 54  122
2007:02 30 572 13 267 43 839 16 809 15 870 32 679 75 55  120
2007:03 31 317 12 741 44 058 17 410 15 512 32 922 75 56  122
2007:04 32 082 12 382 44 464 17 715 15 063 32 778 74 55  122
2007:05 32 606 11 541 44 147 18 678 14 441 33 119 75 57  125
2007:06 30 965 11 212 42 177 17 475 14 313 31 788 75 56  128
2007:07 30 912 10 882 41 794 18 270 14 125 32 395 78 59  130
2007:08 30 692 10 934 41 626 18 183 14 024 32 207 77 59  128
2007:09 30 033 8 986 39 019 18 303 13 725 32 028 82 61  153
2007:10 27 884 8 277 36 161 17 098 13 030 30 128 83 61  157
2007:11 29 249 7 751 37 000 18 001 12 771 30 772 83 62  165
1  Only Norwegian banks are included. For the index-linked loans, the part financed by loans exceeds 100 per cent. The reason for this is
that foreign-owned (subsidiary or branch) banks in Norway give loans to finance index-linked bonds offered by other parts of the
corporation. This may be the case for Nordea (subsidiary of foreign-owned bank) or Fokus and Handelsbanken (branches of foreign-owned
banks.

Banks. Deposits with index-linked yield, loans to finance these investments, and loan financing share. January 2006 - November 2007

Increased loan financing share of guaranteed deposits

The negative media coverage of guaranteed savings has especially been linked to the risk involved when such investments are financed by loans. Yet figures for November 2007 show that loans to finance investments in guaranteed savings also increased. At the end of November 2007, such loans amount to approximately NOK 31 billion. Loans to finance deposits with index-linked yield constitute NOK 18 billion of these loans, while the remaining NOK 12.8 billion are loans to finance index-linked bonds. Loans to finance deposits with index-linked yield have increased by NOK 900 million from October 2007, and NOK 745 million compared to November 2006.

The increase in investments in deposits with index-linked yields and loans to finance such investments has also resulted in an increased loan financing share of the guaranteed deposits. By end-November 2007 the loan financing share of guaranteed deposits was 62 per cent. This is an additional 1 percentage point increase compared to the unprecedented loan financing share in October 2007, and an increase of 7 percentage points compared to November 2006. The high level of investments in guaranteed savings financed by loans is worrying for the bank customers. The Financial Supervisory Authority of Norway published a study on guaranteed savings on 2 January this year which showed, among other things, that 54 per cent of loan-financed investments in guaranteed savings provided either losses or zero yield for the investors.

What are guaranteed savings?

Banks offer a wide variety of so-called guaranteed savings or structured products. The main types are deposits with index-linked yield and index-linked bonds. The yield of the products is fully or partly linked to an index - often a share index listed on the stock exchange. The customer is usually guaranteed the nominal value of the investment and a yield linked to the index if the index has a positive development. Investments in such products are often financed by loans.