In Germany, banks would refuse customer deposits because of the negative interest rate imposed by the European Central Bank (ECB). Some banks even offer online tools that allow customers to accept deposits from other banks.

Negative ECB interest rates force banks to liquidate customer deposits

Banks in Germany are telling customers to park their deposits elsewhere because they can no longer afford the cost of parking them at the ECB, the Wall Street Journal reported Tuesday. The central bank has set negative interest rates since 2014. The interest rate currently stands at -0.5%, and according to the central bank, it is not expected to change in the near future.

After years of trying to pass on negative interest rates to customers, for example by charging higher fees, German banks are now waiving customer deposits, the publication adds :

Banks are even offering new online tools to help customers deposit money elsewhere.

More than 260 banks in Germany now charge private customers negative interest rates, compared with only 57 before the pandemic last March, according to the price comparison portal Verivox.

The charges are between 0,4 % and 0,6 % for deposits between EUR 1 000 and EUR 500 000. Last November, another comparison portal, Biallo, discovered that more than 300 banks were applying negative interest rates. Since last year, the largest German banks, Deutsche Bank and Commerzbank, have been charging their new customers 0.5% per year for holding large amounts of money.

German banks suffer more from negative interest rates than in most other European countries because Germans are large depositors. According to the ECB, about 30% of all household deposits in the euro area are in Germany.

The coronavirus pandemic also played an important role in amplifying the effect of negative interest rates on banks in Germany. Deposits in the country rose 6% last year to a record 2.55 trillion, as people spent less during shutdowns and travel restrictions. Publication added:

The savings rate has shot up among homebuyers. And massive ECB bailout programs have flooded banks with excess deposits.

What do you think about banks refusing customer deposits? Let us know in the comment section below.

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