Time deposits ( time deposits , futures deposits , fixed deposits or bank-technically time deposits ) are short- to medium -term deposits at banks , where the maturity or notice period less than one month.
Time deposits are one of the three forms of bank balance , which also includes sight deposits and savings deposits . All three types differ primarily in terms of their term or notice period , because sight deposits are due and available on a daily basis, the term or notice period for fixed-term deposits is at least one month. Savings deposits must have a term or notice period of at least three months. There may therefore also be temporary deposits with a term or notice period of six months or more, provided that they are expressly agreed as temporary deposits. Only sight deposits may be used in addition to financial investments for payment transaction purposes. With a normal interest structure , the sight deposits have the lowest interest rate , followed by time deposits; the highest rates are usually obtained on savings deposits.
On the money market is the overnight and term money market , a market segment in which banks and institutional investors subsistence and time deposits replace each other.
Depending on whether the customer agrees a fixed term or a specific period of notice for his investment with the bank, a distinction is made between fixed-term deposits and termination deposits :
- When investing fixed-term deposits , a fixed term is agreed between the customer and the bank, at which a certain point in time for the due date of the investment is agreed in advance. At the end of the term they can either demand deposit be continued or prolonged be (extended). In the event of a prolongation, the current market interest rate usually applies . During this period, an interest rate is set that remains unchanged until the due date, market fluctuations are not taken into account. If the fixed-term deposit has to be terminated before the agreed term has expired, this is usually associated with the loss of interest. The term begins exactly on the day of the value date on which the respective credit is received in the account.
- At termination funds a certain notice period is agreed. If the bank customer wants to dispose of his financial investment, he must first give notice and wait for the agreed period of notice until the financial investment is available. Until termination, the deposit is indefinite and therefore usually bears variable interest; after termination it takes on the character of a fixed-term deposit for which a fixed rate can be agreed.
With both types, interest is credited on the due date of the investment. Most credit institutions set minimum amounts of 5,000 euros for investments in fixed deposits or notice deposits.
Time deposits are used exclusively for financial investments because they are not available to bank customers during the agreed term or notice period. If the bank customer does not issue new instructions for fixed-term deposits before the time has expired, the bank will usually extend the time deposit by the same, originally agreed term. The interest already paid is then compounded when the new investment is made ( compound interest effect ). Because of this automatic extension, time deposits often take on the character of medium or long-term investments. Because of the interest rate disadvantage, time deposits are not suitable for long-term investments, but should bridge the period until the investment has to be available for consumption purposes or for fixed payment obligations.
Situation in Germany
According to Section 1 (1) No. 1 KWG , the acceptance of third-party funds as deposits or other unconditionally repayable funds from the public is considered a banking business that may only be conducted with the permission of the BaFin banking supervisory authority . Therefore, only credit institutions are authorized to accept time deposits.
A legal definition of the term time deposits was found in Section 3 of the Deutsche Bundesbank's instruction on minimum reserves (AMR), according to which time deposits were deemed to be temporary liabilities with a notice period or a term of one month to four years. This instruction was canceled by the Bundesbank due to the third stage of monetary union . The ECB now includes deposits with an agreed term or notice period of up to 2 years in the minimum reserve requirement .
As is the case with all bank balances, time deposits at German credit institutions are subject to at least the statutory deposit protection and often also the voluntary deposit protection of individual banking associations.
According to the Bundesbank statistics, in February 2010 fixed-term deposits reached around 62% of all domestic non-bank deposits, while the remainder were sight deposits . The largest share with almost 71% is accounted for by time deposits with a time limit of more than 2 years. There is also lively time money trading among banks and institutional investors , on which market participants can offset their short to medium-term excess or need for liquidity.
- ↑ Thomas Hartmann-Wendels / Andreas Pfingsten / Martin Weber, Bankbetriebslehre , 2000, p. 243
- ↑ Communication No. 5004/98 of the Deutsche Bundesbank of December 29, 1998