Financial Liabilities: No Recovery

The ECB's interest rate turnaround in July 2022, initiated in the fight against inflation, led to significant increases in customer interest rates on bank loans and deposits. In the Eurozone, deposit rates for new business with private households rose by an average of 301bps between the end of June 2022 and the peak in November 2023 (3.32%). However, starting in June 2024, the ECB cut the deposit facility rate all the way to 2.00% by June 2025. Consequently, deposit rates on new business for private households in the Eurozone fell back to 1.81% on average in June 2025.

Private households took advantage of the initial rise in interest rates to switch from non-interest-bearing sight deposits to deposits with agreed maturity. Consequently, the proportion of the former within total bank deposits has decreased by an average of 6.7pps since June 2022, reaching 55.1%, while the proportion of deposits with an agreed maturity has increased from 11.6% to 19.5%. In absolute terms, the outstanding amounts of these deposits have almost doubled to approximately EUR1.9trn (EUR5,360 per capita). Overall, the value of outstanding bank deposits in the eurozone was more than EUR9.6trn, equivalent to EUR27,440 per capita on average, representing a +7.7% increase since June 2022.        

Due to longer loan terms, the rise in interest rates was passed on much less strongly on the lending side (+258bps) than on the deposit side (+301bps). Nevertheless, this increase has led to a significant slowdown in credit growth. From January to April 2024, the average annual (nominal) rate of change in the Eurozone turned negative, meaning more loans were repaid than new ones taken out. The different speeds at which interest rates were adjusted also led to a noticeable decline in bank margins. At a country level, the interest rate differential decreased by 67bps in Germany, 66bps in Italy, 56bps in France and 20bps in Spain (end of June 2022 to November 2023).

With the exception of Spain, interest rate cuts were also passed on less strongly to loans than to deposits for the same reason. Compared with November 2023, the weighted average lending rate on new business in the Eurozone fell by 103bps to 4.26% in June 2025, compared to a fall of 151bps on the deposits side. However, this decline was sufficient to stimulate credit demand, resulting in accelerating credit growth, which reached +1.9% (y/y) in June 2025 across the Eurozone. In total, outstanding loans in amounted to nearly EUR6.8trn, or EUR19,310 per capita on average, corresponding to a +3.2% increase since June 2022.

As interest rates declined faster on the liability side than the asset side of banks' balance sheets, margins rose again. Among the four largest Eurozone economies, France saw the highest increase in the interest rate differential since November 2023 (+98bps), followed by Germany (+53bps) and Italy (+30bps). In Spain, however, margins continued to fall (-47bps).

Following a prolonged downward trend, margins on new business in the Eurozone as a whole have increased in recent months, reaching 5bps higher in June this year than at the end of June 2022 (Figure 15). Spanish banks, however, have suffered a decline of 66bps, while the respective declines in Italy and Germany were 36 and 13bps. Conversely, banks in France improved their interest rate differential by 42bps during this period. In terms of absolute levels, however, the countries have converged over time. At its peak in January 2023, the difference between the lowest margin (0.57bps in France) and the highest (4.26bps in Spain) was 369bps. By June 2025, this gap had shrunk by around two thirds to 118bps, with the lowest margin standing at 1.72% in France and the highest at 2.90% in Germany.

Households in the four largest economies are clearly feeling the effects of the end of zero interest rates in their wallets, albeit to different degrees (Figure 16). German and French households are benefiting quite nicely. Net interest payments have fallen significantly in both countries. In Italy and Spain, however, households have had to pay more.

While German households incurred net interest expenses totalling EUR3.4bn in June 2022, this figure fell to EUR2.9bn by June this year. From March to July 2024, net interest payments amounted to just EUR2.0bn per month. However, net interest expenditure has risen steadily again since August 2024. In France, net interest expenses are at a much lower level, reflecting the narrow bank margins. Since February 2023, they have remained close to zero, even turning positive in some months. However, two years later, net interest payments turned negative again, reaching EUR0.6bn in June 2025, which is roughly half of the amount in June 2022. Compared to June 2022, the accumulated monthly interest savings in Germany and France amount to EUR 26.6bn (an average of around EUR320 per capita) and EUR34.2bn (an average of around EUR500 per capita), respectively.

The situation in Italy and Spain is different: not only have net interest expenses fluctuated less, but the net interest burden has also worsened significantly. Spanish households were paying EUR1.4bn in interest in June 2022. By November 2023, this figure had risen to EUR2.3bn. Although net interest expenses declined again by June this year, at EUR2.0bn they remained significantly higher than before the interest rate turnaround. The net burden also increased for Italians, rising from EUR1.1bn in June 2022 to EUR1.6bn in June this year. Accumulated additional expenditure on interest payments since June 2022 amounts to EUR12.6bn (an average of around EUR210 per capita) in Italy and EUR22.1bn (nearly EUR460 per capita) in Spain.

The gains of German households are mainly due to agile savers flocking to attractive offers en masse. Outstanding deposits with agreed maturity rose by EUR419bn (+161%) over June 2022, equating to EUR5,030 per capita, and their share of overall deposits more than doubled to around 23%. In France, however, the shift away from current accounts towards higher-yielding deposits with agreed maturity was less pronounced (an increase of nearly +14% in the same period), because current accounts play a much smaller role to begin with. In June 2022, for example, less than 36% of all deposits were held in current accounts, compared to 69% in Germany, 73% in Italy and 93% in Spain. The most popular bank accounts are savings accounts, such as the 'Livret A', which offer competitive tax-free rates (but only up to a certain savings limit). It is these savings vehicles that explain why total interest income in France is much higher than in any other country, including Germany, despite the deposit base being much lower. Moreover, both countries benefit from long-term rate fixation on the liability side. In France, the proportion of variable-rate loans was a mere 3.3% in June this year, slightly above the long-term average of 3.1% (2014–2024). In Germany, this proportion was 12.5% (long-term average: 12.2%).

The Italians and Spaniards, on the other hand, face a significantly higher interest burden, primarily due to the relatively high proportion of variable-rate loans: Between 2014 and 2024, 34.8% (Italy) and 36.7% (Spain) of new home loans had variable rates, on average. However, by June this year, these figures fell to 8.9% and 8.4%, respectively. In addition, both countries benefited less on the assets side: Although Spanish and Italian households have more than doubled their savings in the form of deposits with agreed maturity since June 2022 (+135% and +108% respectively), the sums involved are much smaller: on average, EUR1,930 per capita in Spain and EUR790 per capita in Italy. Moreover, these deposits only accounted for 15% and 7% of total bank deposits in June 2025, respectively. Furthermore, deposit rates in Spain increased by “only” 246bps by November 2023, which is significantly less than the Eurozone average of +301bps.

In short: The honeymoon period for some households is slowly but surely coming to an end. The period during which different reaction functions on the asset and liability sides created windfall profits is closing fast. Loans with fixed interest rates will eventually need to be refinanced at much higher rates as long-term rates remain elevated despite cuts by the ECB. Interest rates on deposits are already declining, following the ECB's lead. French and German households are likely to join their Italian and Spanish counterparts in feeling the pinch – at least when dealing with banks.

Compared with previous increases, relatively anemic debt growth was observed in nearly all regions in 2024 (Figure 17). However, Japan bucked the trend, with increasing signs that the country is finally leaving the crippling years of deflation behind. Last year's 2.9% increase in private debt was the highest this century, surpassed only by the exceptional year of 2020 (3.8%), when the pandemic distorted the trend. In Western Europe and North America, however, higher interest rates significantly slowed credit growth. Growth in Western Europe was at least slightly faster than in 2023 (1.2%), at 1.5%, while the downturn in North America continued unabated, with the lowest growth in 10 years recorded at 2.0%. This means that current debt growth in these regions, as well as worldwide, is well below the 20-year average. This discrepancy is particularly pronounced in China, where private debt grew at an average rate of almost 20% per year in the past. However, in 2024, growth was just 3.4%. The reason for this sharp slowdown lies in the ongoing weakness of the Chinese real estate market, which is weighing heavily on consumer sentiment.

Significant shifts in the global debt map have been caused by the very different long-term growth rates of private debt. Unlike the situation with financial assets, North America has grown much more slowly than the global average, with its share of global debt falling sharply from 48.2% to 37.3%. Western Europe and Japan have also experienced sharp declines. In fact, 20 years ago these three regions accounted for 90% of global debt, compared to 64% today. The opposite trend is evident in Asia, particularly China, whose share of global debt has surged from 1.7% to 18.4%, despite its current weak performance. Chinese households now account for around 60% of all private debt in Asia (including Japan).

An interesting trend emerges when we look at the debt ratio (liabilities as a percentage of GDP): at 62.6%, the global debt ratio is now almost 8pps lower than it was two decades ago (Figure 19). Unlike other sectors, particularly the public sector, private households are disciplined in their approach to debt. However, this does not apply to all regions. Deleveraging was primarily pursued by North American (-15.9pps), Japanese (-6.1pps) and Western European (-2.5pps) households. Australia and New Zealand are exceptions among advanced markets, with their debt ratios rising by 15.2pps to reach 113%. Nevertheless, this figure remains below the previous high of 122%, which was reached in 2020.

By contrast, most emerging markets have experienced a significant increase in their debt ratios over the past two decades. China leads the way, with its ratio rising by 43.4pps to reach 61.4%. This puts China just 10pps away from the debt ratio of American households. However, as mentioned above, the Chinese ratio has only increased marginally over the last five years. In the other emerging market regions of Latin America and Eastern Europe, the increase was far less dramatic, and the debt ratio remains relatively moderate. It is worth mentioning the relative stability of the rest of Asia (+4.9pps), which may seem somewhat surprising in this context. However, this is primarily a statistical phenomenon. Over the years, the weight of poorer, less indebted countries has increased, dampening the regional rise. In addition, there has been a sharp decline in private debt in Singapore. At country level, however, the picture is different: in many countries, such as India, the Philippines and Vietnam, debt has risen rapidly in relation to economic output. In Vietnam, it has already surpassed the 50% threshold, reaching 54.3%. Furthermore, some Asian countries, including South Korea (103.6%), Taiwan (93.5%), Thailand (91.3%) and Malaysia (80.9%), have extremely high levels of debt. For comparison, the debt ratio of private households in the US was 98.4% in 2006, on the eve of the global financial crisis. In Spain it was 84.2%, and in Ireland it was 95.0%.

Relatively strong growth in assets and relatively weak growth in debt led to a significant increase in net financial assets (financial assets minus liabilities) in 2024. At 10.3%, this exceeded the strong growth of the previous year (+9.4%) by a considerable margin. Overall, global net financial assets totaled EUR210trn by the end of 2024. This represents a doubling of assets over the past decade. Growth last year was well above the long-term trend in almost all regions (Figure 20). Even in advanced markets such as North America and Australia/New Zealand, double-digit growth rates were achieved. Growth was rather weak only in Latin America, mainly due to developments in Mexico, where net wealth declined slightly by -2.0% last year. While North America's share of global gross wealth remained just under 50%, its share of net wealth increased to over 51%.

Once again, these figures should be adjusted for population growth and, above all, inflation (Figure 21). At first glance, the situation is very similar to that of gross financial assets. China is the undisputed leader, with net financial assets per capita, having increased by more than sevenfold over the past two decades when adjusted for purchasing power. No other region can compete here, not even the other emerging market regions, which recorded a mere doubling. Among the advanced markets, it is striking that Western Europe is lagging behind Japan.

Comparing the development of gross and net financial assets reveals a clear pattern: in emerging economies, real net financial assets have grown significantly more slowly than real gross financial assets in recent years. In China, for example, the gap was just under 1pp per year. This growth gap implies that debt in these countries has, on average, grown faster than assets. In advanced economies, however, the opposite is true: debt is growing more slowly, meaning that net financial assets are growing faster than gross financial assets.

Examining the ranking of the 25 richest countries by net financial assets per capita at the end of 2024 reveals some differences compared to the list based on gross assets. Notably, the US has overtaken Switzerland to take the top spot, as the latter has more than twice the debt per capita (EUR128,710 vs EUR59,160). Singapore and Denmark have swapped places as did Sweden and Canada. Meanwhile, the Netherlands, Australia, the UK and Norway have slipped down the rankings, while Japan, Germany, Italy and Spain have moved up. Notably, Spain is now among the top 20 richest countries in the world.