According to reports, banks in Germany are rejecting customer deposits because of the negative interest rate imposed on them by the European Central Bank (ECB). Some banks even offer online tools that customers can use to make their deposits elsewhere.
Negative interest rates imposed by the ECB are forcing banks to turn away customer deposits
Banks in Germany have urged customers to make their deposits elsewhere as they can no longer bear the cost of parking funds at the ECB, the Wall Street Journal reported Tuesday. The central bank has introduced negative interest rates since 2014. The interest rate is currently -0.5%, which, according to the central bank, is unlikely to change anytime soon.
After years of trying to pass the cost of negative interest on to customers, such as charging higher fees, banks in Germany are now rejecting customer deposits, the publication said.
Banks are even offering new online tools that customers can use to make their deposits elsewhere.
More than 260 banks in Germany are currently charging negative interest rates to private customers, while this was only 57 prior to the pandemic in March last year, according to the price comparison portal Verivox.
The fees range from 0.4% to 0.6% for deposits between € 1 and € 500,000. In November last year, another comparison portal, Biallo, found that more than 300 banks charged negative interest rates. The largest German banks, Deutsche Bank and Commerzbank, have been charging new customers an annual interest rate of 0.5% since last year in order to have large sums of money with them.
In Germany banks are more affected by negative interest rates than in most other European countries because Germans save a lot. According to the ECB, around 30% of all household deposits in the euro zone come from Germany.
The coronavirus pandemic also made a significant contribution to intensifying the effects of negative interest rates on banks in Germany. Last year, deposits in the country soared 6% to a record $ 2.55 trillion as people spent less on lockdowns and travel restrictions. The publication added:
The savings rates skyrocketed among consumers at home. And huge aid programs from the ECB have flooded the banks with excess deposits.
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