Impact of the COVID-19 pandemic on households deposits trends in banks of Ukraine

Abstract

Abstract. The coronavirus outbreak (Covid-2019) has significantly impacted all aspects of social life. One of these aspects turned out to be the behavior of households as bank depositors. The phenomenon manifested itself in the fact that instead of the expected decrease in the volume of households deposits, which was characteristic of the crises of previous years, there was an increase. This feature turned out to be typical for both developed countries and developing countries. An analysis of scientific works has shown that the motives for such behavior can be caused by various factors, which depend, among other things, on the level of economic development of countries. The purpose of this article was to identify the characteristics of the behavior of households as depositors and changes in the structure of their deposits during the Covid-19 pandemic in Ukraine. A statistical analysis of household deposits in Ukrainian banks for 2019-2020 was carried out to achieve this goal. As a result, it was revealed that the Covid-19 pandemic had generated several uncertainties that the households in Ukraine have not previously encountered. At the same time, the entry into the pandemic occurred against the backdrop of a stable banking system, an efficiently functioning deposit guarantee system, and a relatively stable national currency. The household's response to the Covid-19 pandemic in Ukraine should be considered in two stages. The first stage ? March-April 2020 (the first lockdown was introduced on 12 March 2020 in Ukraine), when two scenarios were implemented: flight-to-liquidity (transformation deposits in cash) and flight-to-safety (transformation of hryvnia savings into savings in foreign currency). And the next stage ? the last part of 2020 ? with other two scenarios: flight-to-digitalization and flight-to-savings. Deposits became the vital component of household savings in Ukraine at this stage. It was shown that there was an increase in deposits in both national and foreign currencies, but the rate of their growth changed, which, among other things, was due to a drop in interest rates. A reduction in the gap between interest rates on long-term and short-term deposits, as well as uncertainty due to the impact of Covid-19, led to a significant increase in demand deposits, which in the future may negatively affect the activities of banks, especially in the context of political instability in Ukraine, which both internal and primarily external factors may cause. Key words: savings, bank run, deposit guarantee system, deposit rates, lockdown, banking crisis, deposits dollarization, demand deposits, term deposits.