MILAN: The Italian arm of France’s Credit Agricole has started offering fixed-term savings accounts to win new customers in its biggest foreign market, at a time when competition for cash among the country’s lenders grows.

With deposit rates lagging soaring lending costs, banks have posted record earnings in recent quarters, prompting Rome’s conservative government to threaten the industry with a tax on windfall profits if they fail to improve savers’ returns.

Credit Agricole Italia is currently advertising an account paying 3.5% over 12 months, a rarity among high street banks in Italy where only digital lenders have been offering these type of time deposits to retain savers.

Such accounts are common in France, where lenders are subject to government-imposed increases to the rates paid on the most popular type of savings.

“French banks are used to time deposits as a funding tool, so it makes sense for them to use the same tool on a different market,” said Milan’s Cattolica University Professor Rony Hamaui, noting that current accounts make up only 35% of total deposits in France compared with 72% in Italy.

Executives at two Italian banks said Credit Agricole Italia’s move was aimed at wooing new customers but added their own lenders’ liquidity and market share was such that they would not follow for now.

Credit Agricole Italia declined to comment. The French bank is also the main investor in Italy’s Banco BPM.

Challenger banks, which don’t have branches and are more exposed to competition, still provide the best deals on bank account comparison website ConfrontaConti.it.

However, “we’ve noticed that some ‘traditional’ banks have started offering time deposits with rates...that are not particularly aggressive,” ConfrontaConti.it said in reply to a Reuters query.

Italy’s BPER recently started offering a gross yearly rate of 4.25% to those depositing 30,000 euros and investing 15,000 euros in asset management products, still far below Italy’s annual inflation rate, which stood at 7.6% in May.