How will banks react if the ECB further lowers interest rates?

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DRaiffeisenbank Gmund am Tegernsee was one of the first cooperative banks in Germany to introduce negative interest rates for private customers with large savings deposits. At least bank manager Josef Paul is now thinking about shifting these rates further into negative territory when the European Central Bank (ECB) further lowers its interest rates on bank deposits with the central bank. "A decision has not yet been made in our house," said Paul F.A.Z .. "Consistently, however, would be a passing on to the polluter," is the personal opinion of the Bank's Board. By "polluter", the bank manager means those people who are parking very large deposits at the bank for some time and thus bring the institution into the trouble of having to pay even negative interest on deposits with the ECB.

Christian Siedenbiedel

The Deutsche Skatbank in Altenburg, which was also one of the pioneers of negative interest rates among Germany's banks, sees two ways in which it could react to even more negative interest rates from the central bank. The bank is looking forward to a decision by the central bank for possible interest rate cuts with interest, a bank spokeswoman said: In this case, the bank has "several options", such as the passing of the increased negative interest rates to their customers – or a reduction in the amount of exemptions, of which at the negative interest becomes effective. "Whether such, or which variant is implemented for our house, depends on the concrete measures of the European Central Bank," said the spokeswoman. So far, the bank requires from private customers of 500,000 euros on the call money account or of one million euros in the checking account to 0.4 percent – business customers pay from 250,000 euros to 0.5 percent.

According to surveys of the internet platform Biallo, 112 banks and savings banks in Germany are currently demanding a "custody fee" or "negative interest", in most cases already from 100,000 euros. The ECB has signaled that a further reduction in negative deposit rates for banks would be possible in the foreseeable future. A survey of economists found that many consider a 0.1 to 0.2 percentage point drop in interest rates in September or October likely. At the same time, however, there is also a discussion about staggering negative deposit rates for banks, such as in Switzerland. That could relieve smaller banks under certain circumstances.

The possibilities are very limited

Obviously, other banks could also come up with the idea of ​​raising negative interest rates from their customers in the future after a rate cut by the ECB. "The possibilities of passing on additional charges through fees and interest rates are limited," said Hans-Walter Peters, President of the Federal Association of German Banks. But the pressure continues to exploit them. "Personally, I would imagine that many banks can no longer handle the long term, the additional burden in the breadth of private customers to pass," said Peters. "Of course every institute has to decide for itself."

From the banking industry one hears, the displeasure in the institutes is meanwhile large. If the ECB cuts interest rates further and signals no signs of recovery, some houses may abandon their reluctance to hold negative interest rates for customers. This applies once to corporate customers, especially if they have no other relationship with the bank in addition to a large deposit. In addition, the really wealthy private customers could be more heavily burdened with negative interest rates, as had made, for example, the Hamburger Sparkasse.

This requires for credits on the current account and savings account of 500000 euros to a negative interest of 0.4 percent. In addition, at the moment, the ominous number of 100,000 euros in the debates, from which future negative interest rates could be due. For the majority of customers with smaller deposits, however, negative interest rates are less likely. On the one hand, because this is not so easy to implement technically – on the other hand, this also does not seem to be advantageous for a bank in terms of marketing.

The consumer advice centers warned the banks

Meanwhile, consumer groups warned banks that there were legal limits to negative interest rates. For the consumer advocates have argued in several courts. "Legally, it is clear that consumer financial institutions are not allowed to demand so-called negative interest rates simply by changing their price tag instead of paying interest on their credit," said Niels Nauhauser, finance expert at the Consumer Affairs Center Baden-Württemberg.

Deposits are legally loans of the customer to the bank. The German loan law know neither the term of the negative interest rates nor the penalty interest, Nauhauser said: "Of course, we follow up complaints from consumers who are required by illegal charges, and also examine legal possibilities." Legal to be distinguished individually are generally permissible fee arrangements for Verwahrverträge.

. (dayToTranslate) Josef Paul (t) ECB (t) F.A.Z. (t) German Skatbank (t) Negative Interest (t) Interest (t) Germany

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