Banks Avoid Deposits That Generate Negative Interest

The largest German lenders, German Bank and Commerzbank, avoid the largest deposits, according to The Wall Street Journal (WSJ) Monday (March 1), as they try to avoid negative interest rates.

Since last year, lenders have told new customers that there will be an annual rate of 0.5% for large deposits above a certain amount, as they can no longer absorb the negative interest rates charged by the European Central Bank (ECB). The more deposits a bank has from customers, the more it has to give to the central bank, WSJ noted.

The situation has become unusual for bank users, with banks typically needing deposits, now essentially telling customers not to do business with them. Some banks have even started offering new digital tools to help customers find other places to do business.

While banks have traditionally resisted passing negative rates on to their customers, the pandemic, with its savings rates soaring as customers stayed at home, has changed that, according to reports. Huge ECB aid programs have also added trucks of excess deposits.

German banks have been hit hard, the WSJ said, because Germans have always been good savers, with around 30% of euro area household deposits credited to them. Last year, deposits in the country rose 6% to a record 2.55 trillion euros ($ 3.5 trillion), as people were reluctant to spend during the first months of the pandemic.

Deutsche Bank charges a negative rate for new customers with more than € 100,000 ($ 139,000). One client cited by WSJ was Alex Bierhaus from Düsseldorf. Bierhaus has chosen to transfer part of its money to Grape, an online platform that allows users to purchase better rates across Europe. Raisin, according to WSJ, said he has seen an increase in services since banks started charging fees.

Bank deposit fees in the United States are also on the rise lately, PYMNTS reported, as customer deposits hit new highs. This has the effect of setting the safety net for defaults below a legal limit, with banks having large sums of money they don’t know what to do with.



About the study: U.S. consumers see cryptocurrency as more than just a store of value: 46 million people plan to use it to make payments for everything from financial services to groceries. In the Cryptocurrency Payments Report, PYMNTS surveys 8,008 cryptocurrency users and non-users in the United States to examine how they plan to use crypto to make purchases, the crypto they plan to to use – and how merchant acceptance can influence merchant choice and consumer spending.

About Jermaine Chase

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