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Morgan Stanley Estimates 8 Pct Of Bank Deposits Could Be Impacted By A Digital Euro

Morgan Stanley Estimates 8 Pct Of Bank Deposits Could Be Impacted By A Digital Euro

June 16, 2021 at 11:13PM
by PYMNTS

Morgan Stanley analysts have said a digital euro might preclude a decline of 8 percent of consumer deposits from euro zone banks, Reuters writes.

The news comes as the European Central Bank (ECB) will likely go forward with research on a digital euro in the coming months. And the analysts say the amount could be higher in some smaller countries in the bloc.

The analysts based their predictions on a hypothetical “bear case” scenario in which euro area citizens above the age of 15 transferred 3,000 euros, or $3,637, into a digital wallet. In that case, the analysts found that could potentially reduce the amount of deposits by 873 billion euros, or 8 percent.

And the average loan-to-deposit ratio would end up boosting 105 percent from 97 percent.

The analysts said this change would hardly be noticeable in the larger markets. But smaller ones, including Latvia, Lithuania, Estonia, Slovakia, Slovenia and Greece, would see more sizable effects — the report notes that converting 3,000 euros in those countries would end up akin to converting 17 to 30 percent of the total deposits and 22 to 51 percent of total household deposits.

However, it probably wouldn’t happen that way, as people would not be likely to convert more than around 12 percent of their deposits, which is how much the 3,000 euros comes out to for the euro area in aggregate.

So even in Greece, the analysts think it unlikely that digital euros could have an impact of more than 10 percent.

PYMNTS reported recently that the ECB said the euro’s standing could be boosted by a digital version of the currency. It could possibly help with consumers’ ability to make payments or add to savings.

The use of the euro has been declining for years, the report said, and COVID-19 only expedited the problem.

But there could also be risks in the form of more crime coming from digital currencies, such as money laundering.