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Term deposits still seen as a safe haven

The popularity of on call high interest rate accounts has not hit the banks’ term deposit markets, says KPMG.

Tuesday, April 24th 2007, 4:18PM

by Rob Hosking

In fact, the latest KPMG financial institutions performance survey shows the amount of money in term deposits has in fact increased.

“We have not seen the pronounced reduction in term deposits and switch into the high interest call accounts that we would have expected,” says the survey report.

”In fact for the four major banks, term deposits increased over the period by 11.9%, and on call interest baring accounts grew 18.8%.”

KPMG’s deputy chairman financial services Godfrey Boyce says part of the reason is the collapse of three finance companies last year and the resulting jitteriness from investors.

“There‘s been some flow across from finance companies after the events of last year – people have gone across to what they see as a safer place to put their money.

“Migrant inflows has also been a factor – migrants are quite attracted to the term deposit market. Some banks, particularly in Auckland, have been quite successful in targeting migrants.”

The combined impact of the large increases in deposits - that means banks have been able to fund a lot of their asset growth from deposits, he says.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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