Fixed-term deposits growing despite major banks offering low interest rates

Coins (picture is illustrative).
Coins (picture is illustrative). Source: Siim Lõvi /ERR

Larger banks in Estonia offer next to nothing in interest on fixed-term deposit accounts, citing a lack of popularity of such accounts, low interest rates in general, as well as unfavorable conditions on the money markets, though some smaller banks have slightly more appealing rates, ERR reports.

Fixed-term deposit volumes have nonetheless risen, the Bank of Estonia says. Riskier savings and loan associations also offer higher interest rates on deposits. 

In some cases, interest rates on fixed-term deposits are zero, with the larger banks.

20 percent income tax is also due on the payment of fixed-term deposit interest, in any case.


Swedish-owned bank Swedbank grants an interest rate of 0.05 percent for a one-year deposit term.

Ksenia Ipolitova, Swedbank's head of savings products, says that deposit accounts are less popular in the current climate, with savers looking to other investment opportunities instead.


SEB Bank, also Swedish-owned, offers fixed-term deposit accounts, but with interest rates of 0 percent.

The bank says this is due to negative interest rates in the money markets.

SEB does, however, provide fixed-term deposit accounts for US dollars, with an interest rate of 0.15 percent over six months.


Estonian bank LHV Pank offers 0.1 percent interest on annual deposits, which LHV Treasury manager Kadri Haldre says is partly due to general interest rates being low.

At the same time, LHV deposit products have proven quite popular, Haldre said, with a year-on-year growth of 13 percent, to €573 million, reported in June.

Smaller banks offer slightly higher rates

Smaller banks in Estonia can do slightly better in terms of rates.

Inbank offers a higher rate than most, at 1.2 percent per annum, with Holm Bank, which only entered the market last year, going to 1.15 percent. Holm has longer-term deposits of €45.3 million at present it says.

Deposit volumes growing

According to the Bank of Estonia, at the end of last year, fixed-term deposits totaled nearly €3.3 billion euros, compared with €2.8 billion a year earlier.

The proportion of fixed term deposits, while much more popular 10 years ago, at 43 percent of total deposits (€4.5 billion), has risen slightly from 15 percent at the end of 2017, to 17 percent two years later.

Savings and loans associations offer higher rates, higher risks

Savings and loan associations offer much higher interest rates, generally 4-8 percent, though joining these require paying both a connection fee and the required share capital.

These deposits are additionally not guaranteed by the state, unlike with the banks. In the event of the association going bankrupt, depositors can lose everything.

For instance the Tartu Savings and Loan Association (Tartu hoiu-laenuühistu) requires a joining fee of €10, with a minimum share capital of €35 for a "natural" person, and €50 for a "legal" person. Interest stands at 5 percent per annum, rising to 5.5 percent for deposits over €2,000 and where the deposit makes up at least 5 percent of the total share capital.

The Estonian Development Savings and Loan Association (Eesti Arengu hoiu-laenuühistu) promises interest of up to 12 percent per annum, on a minimum deposit of €1,000 over five years. The association pays out €480 in net income on maturation, and charges €6 joining fee plus €30 refundable at the end of the term. 

According to daily Äripäev, however (link in Estonian), such associations loan to companies related to their board members, and in the opinion of some lawyers, agreements contain clauses which are illegal. 

Other instruments include the Guarantee Fund (Tagatisfond) – which guarantees deposits up to €100,000 per depositor with SEB, Swedbank, LHV, Inbank, Bigbank, Coop Pank, Holm, Luminor and TBB, as well as with foreign banks Citadele, Danske, Svenska Handelsbanken and OP Bank are also guaranteed to the same extent.

The Savings and Loan Cooperatives Fund (Hoiu-laenuühistute fond), which includes five cooperatives, guarantees deposits of up to €20,000.

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Editor: Andrew Whyte

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