From Free to Fee

  • Why it matters

    Why it matters

    Even small retail bank account holders are starting to feel the pain of the ECB’s prolonged zero interest rate policy, which is forcing saving banks to charge fees or go bust.

  • Facts


    • Germany’s highly competitive retail banking market has kept fees down for consumers compared to countries like the United States and Britain.
    • Eight of Germany’s 10 largest savings banks have introduced account fees this year to compensate for lost revenue from low interest rates, since German financial institutions earn three quarters of their revenue from interest on loans and other investments.
    • Industry experts estimate that between 25 and 40 percent of Germany’s bank branches could close in the next five years.
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For most German savings bank customers, free accounts will soon become a thing of the past. Source: DPA / Angelika Warmuth.

It’s always been something of a luxury here in Germany. Many households in this land of savers have been able to open an account at a local commmunity bank without having to pay a fee – something banks in many other industrial countries have long since abandoned.

Now that’s changing in Germany, too. The era of free accounts at Germany’s community savings banks or “Sparkassen,” a network of some 400 financial firms that form the backbone of the country’s banking industry, is coming to an end. Eight of the country’s 10 largest savings banks have raised fees on retail accounts this year.

It’s a luxury that Germany and its banks can no longer afford, and yet another reason for households to take their ire out on the European Central Bank, which is extremely unpopular in Europe’s largest economy.

That’s because Germany’s community-owned savings banks have little choice in the matter. The ECB’s decision to keep benchmark rates at zero has deprived them of a key revenue stream.

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