Spanish lenders have to start paying customers more for their savings and share what they’ve gained from higher interest rates, Economy Minister Nadia Calvino said.

“I have no doubt that the Spanish banking sector has to start transmitting the rise in interest rates to the benefit of customers and Spanish citizens,” Calvino said on Monday at an event sponsored by Banco Bilbao Vizcaya Argentaria SA in Santander, northern Spain.

Spanish banks have boosted margins as their main lending activity has benefited from the European Central Bank tightening monetary policy and lifting its deposit rate to 3.5%, the highest level in more than two decades. Still, most Spanish lenders have so far opted not to pass on much of that increase to the rates they pay retail customers for deposits, one of the most popular options for savings in Spain.

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BBVA Chairman Carlos Torres said excess liquidity in the financial system is the reason why Spanish banks aren’t paying clients more for their deposits, though the situation could reverse once liquidity starts to dry up.

“Those of us who have excess liquidity aren’t paying for deposits,” he said. Instead, banks are offering other products such as fixed income mutual funds or savings accounts, Torres said.

While larger lenders such as Banco Santander SA, BBVA or CaixaBank SA haven’t started massive campaigns to pay for client deposits, smaller competitors are doing so as they bet on winning market share. Last week, ING Groep NV launched a three-month deposit in Spain offering an annual remuneration of 2.5% for as much as €100,000 of new savings.

Author: Macarena Muñoz