Alba Blog

Population Ageing and Its Impact on Banks

pavramidis@alba.acg.edu (Avramidis Panagiotis) — Mon, 12 Jan 2026 09:40:49 GMT

Demographic aging not only reshapes labor markets, pension systems, and public finances; it also gradually but fundamentally transforms the structure and risk profile of the banking sector. As the share of older households increases, banks’ business models shift accordingly—relying more on retail deposits, extending fewer loans, holding more securities, and taking on greater interest rate risk.

The first and most immediate effect of population aging concerns bank funding. Older households are, on average, net savers and show a strong preference for safe and liquid assets. In markets with a higher share of older households, banks finance a larger portion of their balance sheets through retail deposits and rely less on market funding and large, uninsured deposits. Deposit-based funding thus becomes both cheaper and more stable.

Notably, in markets with older populations, deposit interest rates tend to be lower, particularly for longer-maturity products such as multi-year time deposits. When policy rates rise, these deposit rates adjust more slowly, widening the spread between the returns on banks’ assets and the interest they pay to depositors. Because older savers are less inclined to “chase” marginally higher yields elsewhere, their deposits are more inert and less sensitive to changes in money market conditions.

On the asset side, population ageing is associated with a clear decline in entrepreneurship and, more broadly, in demand for credit. As local communities grow older, banks extend fewer loans as a share of total assets and instead hold a larger proportion of investment securities, often government bonds or other fixed-income instruments. The decline in lending is particularly pronounced in categories critical to growth and local economic activity, such as small-business lending and mortgage loans.
This shift has important implications for both financial intermediation as well as financial stability. As aging reduces the volume of lending, bank balance sheets increasingly resemble those of bond mutual funds, with banks acting as intermediaries that transform safe, long-duration securities into deposit claims held by older savers.

The stability of deposits held by older savers means that, under normal conditions, these funding structures appear resilient: deposits are less prone to sudden withdrawals, and reliance on market funding is weaker, as wholesale creditors play a smaller role. However, precisely because the deposit base is insured, a larger share of the downside risk from interest rate exposure ultimately falls on deposit insurance schemes and, in turn, the public sector. Population aging, therefore, shifts part of the risk away from markets and toward the institutions of the financial safety net. Moreover, greater holdings of longer-term securities increase interest rate risk.

Demographic changes also interact with monetary policy. Banks’ funding costs respond less to changes in policy interest rates, and deposit volumes are less sensitive to such shifts. As societies age, the traditional bank lending channel of monetary policy may therefore weaken, requiring larger or more persistent policy actions to achieve the same macroeconomic outcomes.

Population ageing is typically analyzed as a challenge for pensions and healthcare, yet it is an equally significant factor for bank balance sheets. As societies grow older, banks gradually transform into institutions with long-duration portfolios and a strong presence of bonds, funded by loyal, risk-averse savers. This transformation will shape the resilience of the financial system and the effectiveness of macroeconomic policy in the decades ahead.

P. Avramidis, Professor at Alba Graduate Business School, The American College of Greece
Based on recent research using U.S. data, published in the Journal of Money, Credit and Banking.

Greek Public Shows Low Trust in Corporate ESG Efforts, The Hellenic ESG Barometer Reveals

pvlachos@alba.acg.edu (Vlachos Pavlos) — Sat, 12 Jul 2025 07:10:19 GMT

Co-Authors: Krystallis, A., Apostolaki, S. & Alexopoulos, A.

The results of our recent survey on how Greek society perceives the environmental, social, and governance (ESG) efforts of businesses operating in the country—the 2025 Hellenic ESG Barometer—have been released.

Charting New Horizons: Shipping Students Dive into Norway’s Maritime Industry

svougious@alba.acg.edu (Spyros Vougious) — Wed, 28 May 2025 08:13:30 GMT

There’s no better way to truly grasp the complexities of global shipping than by stepping into one of the industry’s most influential maritime hubs—Oslo, Norway. This year, shipping students from Alba Graduate Business School embarked on a five-day educational field trip to Oslo, a city at the heart of Northern Europe’s maritime innovation and tradition. What followed was a deeply enriching journey of professional exposure, cultural discovery, and community building.

The Power of Balance: A Woman’s Journey of Leading, Learning, and Empowering Change

I.Achimugu@alba.acg.edu (Ibe Achimugu) — Thu, 06 Mar 2025 12:10:44 GMT

From Greece to the U.S.: Chasing Dreams, Conquering Challenges

A.KANELLOPOULOS@acg.edu (Anastasia Kanellopoulos) — Thu, 06 Mar 2025 09:01:46 GMT

Connecting People, Cultures, and Economies on a Global Scale

ebaralou@alba.acg.edu (Evangelia Barallou) — Tue, 24 Sep 2024 14:30:02 GMT

Tourism has always been a dynamic industry, constantly evolving as traveler preferences shift, new destinations emerge, and external factors shape the way we explore the world. For those pursuing a graduate degree or a career in Tourism Management, understanding key tourism trends is critical for staying ahead of the game. Let’s dive into the top trends currently shaping the tourism landscape, so you can take these insights into your future career with ease.

A Journey of Growth and Friendship

Teti Tsekoura — Wed, 22 May 2024 19:44:05 GMT

Embarking on the Executive MBA (EMBA) journey, I found myself confronted with a daunting array of numbers: over 400 hours of coursework, 22 individual assignments, 5 group projects, and countless hours of preparation. But beyond the quantitative metrics lie the subjective experiences, the moments of self-discovery, and the bonds forged with fellow travelers on this educational journey.

Unveiling the Artistry of Finance: Educating Minds to Analyze Rationally and Interpret Creatively

Alexandros Maglaras — Tue, 21 May 2024 04:56:21 GMT

Asset management is both a science and an art. Like a science, all the facts are clear and readily accessible to all interested parties. Investment managers scientifically leverage abundant datasets and metrics to monitor, predict, and analyze the market. But the art of making sound investment decisions requires more than measuring and modelling data. Like an art, it involves a departure from cold scientific judgment, toward a multidisciplinary interpretation of data, trends, macroeconomics, geopolitics and herd psychology, while accounting for risk and uncertainty. The goal of a MSc Finance should be to prepare future professionals to analyze with rationality and interpret with creativity.

The Alba Chronicles: Katerina Karapa’s EMBA Experience

Katerina Karapa — Mon, 22 Apr 2024 06:57:00 GMT

Embarking on the journey of an Executive MBA program is akin to setting sail into uncharted waters of career growth and personal development. For Katerina Karapa, Group Quality Assurance Director at FAMAR and alumna of the Alba Executive MBA, this voyage has been nothing short of transformative—a testament to the unparalleled value of the program for aspiring executives.

Executive MBA through the eyes of alumnus, Dimitris Destes

Dimitris Destes — Wed, 17 Apr 2024 06:28:00 GMT

In an age defined by perpetual evolution and transformative shifts, the Alba Graduate Business School stands as a stalwart beacon of innovation and adaptability. At the 10^th anniversary of the launch of the Executive MBA, Alba reaffirms its commitment to meeting the dynamic educational needs of C-level executives, offering an innovative curriculum designed to equip participants with the skills and insights necessary to thrive in an ever-changing landscape.

Among the distinguished alumni who have emerged from the crucible of the Alba Executive MBA program is Dimitris Deste (Alba ’20), Commercial Director of the Mobility Business Unit at Info Quest Technologies. Dimitris's journey through the EMBA program serves as a testament to the profound impact of executive education on professional growth and personal transformation.