More and more banks and savings banks are passing negative interest on to some private customers. This emerges from data from the comparison portal Verivox. Since the recent rate cut by the European Central Bank (ECB) just under six months ago, the number of institutions has more than quadrupled to at least 61. This year alone, according to Verivox, 35 institutes have introduced negative interest on balances, especially in the overnight deposit account.
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However, such banks are still in the minority: the comparison portal has evaluated the price notices published by the Internet of around 800 banks and savings banks. The focus is on overnight accounts. Since some institutions have individual agreements with wealthy customers, a total of more than 61 financial institutions are likely to charge negative interest rates, said Verivox manager Maier. In addition, there would be six financial institutions, for which the usually free overnight deposit account costs fees. This would actually result in negative interest rates.
In mid-September 2019, the ECB had raised the penalty rate to 0.5 percent that financial institutions had to pay when parking money at the central bank. The monetary authorities want to create incentives for lending to boost the economy. Even if there are now higher allowances, the penalty interest is a billion dollar burden for the industry. According to data from the Bundesbank, from mid-December 2018 to mid-December 2019, credit institutions paid around 2.4 billion euros in interest on money stashed at the central bank.
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Consumer advocates doubt the need for negative interest rates
Banks have been passing the costs on to corporate customers for some time. However, it is also increasingly affecting private customers, sometimes even with lower sums. According to Verivox, ten institutes grant customers less than 100,000 euros in allowance on their overnight deposit account, two of which charge the negative interest on the entire balance.
According to consumer advocates, negative interest rates are generally prohibited. For existing and new customers, they are only permitted if the custody fee has been explicitly agreed with the customer. “It is not enough to just change the general terms and conditions,” said Dorothea Mohn, head of the financial market team at the Federation of German Consumer Organizations. Those affected should contact consumer advice centers if they have any questions.
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In general, consumer advocates are critical of negative interest rates for “usual” sums in savings or checking accounts. “In our view, this is not economically necessary. The banks continue to earn well,” said Mohn. Affected customers should consider switching banks.
Associations such as the cooperative association do not expect negative interest rates across the board. The Volks- und Raiffeisenbanken take the “protection of the savings concept” very seriously, said association chief Ingmar Rega recently. “There is much more discussion about passing on negative interest rates than about the lack of wealth accumulation for people’s old-age provision,” said Rega.
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