Competition to rise in deposit market

IRISH BANKS are set to face two new competitors in the important customer deposit market, with plans by both the National Treasury Management Agency (NTMA) and Iceland's biggest bank, Kaupthing, to launch new deposit products.

The NTMA is reported to be seeking a retail partner to launch a series of new consumer savings products, some of which will include State-backed capital guarantees.

An increase in customer deposits managed by the NTMA, which already operates a number of savings products through An Post, could help reduce the State's reliance on global debt markets for the financing of its national debt.

State-backed deposits have become more attractive to consumers, who have grown more nervous of the banking sector following the run on Northern Rock's deposits last autumn and the ongoing credit squeeze.

Meanwhile, Kaupthing is gearing up to enter the Irish deposit market through a new online bank, which will be known as Kaupthing Edge.

The bank, which already operates in Scandinavia and Belgium, plans to introduce high-yield deposit products here by the end of the year, according to media reports.

Deposit accounts have become an increasingly competitive corner of the market over the past 12 months, as the credit crunch hit the financial sector. The nervous banking climate since August 2007 resulted in a spike in intrabank borrowing rates and left banks with large customer deposit bases in a stronger position.