There are several reasons for these differences:
- Banks' liquidity needs. All banks need to have a solid liquidity base. One way to achieve it is by raising interest rates and thus raise sufficient funds.
- Liquidity diversification. It can be in a bank's interest to capture liquidity from different sources and countries. Ireland has one of the lowest average interest rates on deposits up to 1 year in the Eurozone, giving European banks plenty of room to achieve this diversification at a good price.
- Bank’s business model. Unlike larger banks, whose growth has slowed down in the last years, other sectors, such as technology or e-commerce, have seen considerable dynamism. Specialised banks participating in this growth increasingly need the liquidity that is largely sitting in larger banks, and their margins allow them to compete by offering higher interest rates to attract it.
- Bank’s current situation. The entity may be in a period of growth or they may need funds for new projects, etc.
- Industry competition. The greater the number of banks in a country, the greater the competition and normally, the higher the interest rate they pay on deposits. In this way, they ensure a greater market share.
- Interest rate differential. There are also differences between the interest rates banks charge their customers when they take out loans or mortgages and what they pay for their deposits. High interest rates on mortgages and loans also make it possible to offer high rates on deposits.