According to data of the Bulgarian National Bank, the bank deposits of the Bulgarian households amount to EUR 19.7 billion at the end of June, 2014. The central bank informs about money reflux to the tune of EUR 244 million which, according to financial experts is due to the tension around the Corporate Commercial Bank which made some Bulgarians withdraw their savings. However, the bank deposits of the citizens marked an impressive increase of 8.5% over the past twelve months.

Analysis of Unicredit bank about the financial wealth of the households in Southern and Eastern Europe shows that in 2013 nearly 82% of the total financial assets of the Bulgarian households were in bank deposits and cash, 16% were invested in mutual and pension funds and only 2% in shares. Thus, Bulgaria placed first in Central and Eastern Europe with highest percentage of bank deposits in the total financial wealth. In other EU countries such as Germany and Italy for example 38% of the financial assets of the households are managed by mutual and pension funds. Even the tax introduced on the bank deposit interest did not reflect negatively on the adjustments of the Bulgarians to keep their money in deposits. “The high level of bank deposits in Bulgaria is mainly due to the fact that people who have spare money are not aware of other alternative financial instruments and most people view bank deposits as their main investment alternative. Moreover, in times of economic crisis over the past years, the citizens preferred to abstain from investing on the financial markets”, says financial analyst and portfolio manager Alexander Nikolov from Karoll financial group and added:

“In my view, the increase of the bank deposits is due to the period of crisis. Meanwhile, between 2009 and 2011, the interest on bank deposits was relatively high which made each one chose whether to risk and start a new business or make other financial investments, or merely receive a fair revenue from interest rates. Many people were motivated to keep their money in deposits which were safer and offered attractive interest, too.”

Can we claim that Bulgarians are more inclined to invest their money in bank deposits, as compared to other EU citizens and is this due to the aptitude of the people to save more?

“Well, there is such a trend, as compared to the average European levels. According to the researches we made, this is mainly due to the lack of information regarding what is the real effect of the bank deposits, because most of the revenue received from interest rates is compensated by the annual inflation. However, many people are not aware of this fact and it seems that the Bulgarians are very conservative. In fact, people do not realize that they do not receive a net profitability exceeding the inflation rate and they do not know what to do in order to receive higher revenue.”

Can you name other financial instruments which can be used as an alternative of the bank deposits?

“There are various financial instruments. The easiest way to make investment apart from bank deposits is to put money in the so-called mutual funds. There are many funds of this type in Bulgaria, managed by local and foreign companies. The mutual funds give people the opportunity to make riskier investments in given regions and countries (i.e. if one thinks that a given region or a country has a high potential, he can invest there), or more balanced investments in funds where half of the portfolio is kept in shares and the other half is kept in more conservative instruments such as bonds, deposits, etc. Some funds invest in estates in Europe, the USA, etc.”

In Alexander Nikolov’s view, every Bulgarian, depending on his revenue ambitions and the level of risk he could assume, can form an investment portfolio through several mutual funds. He contends that a higher transfer of money from deposits to mutual funds and other financial instruments was registeredover the past twelve months. The latter is mainly due to the lower interest rates on bank deposits. This process is expected to continue, as all forecasts show that the interest rates will continue to drop. “The better people are informed about alternative financial instruments, the higher flow of money to non-banking financial instruments”, Alexander Nikolov concludes.