Negative Rates

Not-So-Free Checking

  • Why it matters

    Why it matters

    The ECB’s ultra-easy monetary policy, which includes a negative deposit rate, has squeezed bank earnings and they’re trying to pass on some of the cost to their customers by charging them for holding deposits.

  • Facts


    • 11 German banks have introduced negative interest rates or fees on customer deposits in response to the ECB’s 0.4 negative deposit rate, according to a list compiled by comparison site Verivox.
    • The consumer rights organization for the state of Baden-Württemberg is considering challenging the practice in court.
    • One legal expert told Handelsblatt it was inadmissible for banks to start charging existing customers for holding their deposits unless they gave their approval.
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Customers may soon want to park their cash under the mattress, or in vaults like this one of Germany's Bundesbank. Source: DPA

If you deposit your cash in a bank, you are effectively lending it money, so it doesn’t really seem fair for the bank to charge you for it. It’s why banks in most countries offer free checking accounts – to the chagrin of many bankers who complain that the practice masks everything a bank has to do to keep those accounts operating.

Some German banks – frustrated even more by interest rates that are among the lowest in Europe – are trying to change that. So far, 11 banks have introduced fees for retail customers, in most cases only for holding sums above a certain threshold, according to the Verivox comparison website. Whether they are allowed to by law is another matter.

These negative rates for normal savers break a taboo in Germany and could soon be challenged in court. The consumer advice center for the state of Baden-Württemberg has filed a complaint against a local bank, Volksbank Reutlingen, saying it was inadmissible for customers to be charged without their approval. It has threatened to take legal action if necessary to clarify the situation.

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