ECB Repercussions

Paying For What You Already Own

  • Why it matters

    Why it matters

    The ECB decision to charge banks fees to park their reserves (negative interest rates) is forcing fees on bank depositors, lowering the real value of their holdings. Savings banks’ profit margins are also under serious pressure.

  • Facts


    • The European Central Bank in June 2014 began charging banks that park their excess reserves with the central bank. The “negative deposit rate” is currently 0.4 percent.
    • The ECB hopes the charges will ultimately motivate consumers and companies to buy or invest their surplus funds and support economic growth.
    • Retail customers have so far been spared negative interest rates in nearly all cases, but many have been forced to pay for bank services which used to be free.
  • Audio


  • Pdf
main 68400287 source Julian Stratenschulte DPA – savings bank Sparkasse in Hannover pedestrians logo S
German savings banks are passing the ECB's costs on – to their owners. Source: Julian Stratenschulte / DPA

The European Central Bank’s loose monetary policy is having a serious effect on Germany’s savings and cooperative banks, a Handelsblatt survey shows. Faced with negative interest on their ECB accounts – essentially a fine for depositing reserves with the ECB – German banks have passed on the charges to corporate customers, forcing them to pay for the money they deposit in their accounts.

Most of Germany’s biggest commercial banks have already slapped charges on deposits over the past year. Now, the biggest savings and cooperative banks in the country are following suit. Eight of Germany’s 10 largest savings banks are now charging their largest customers, the survey shows.

That includes charging their municipal customers, meaning cities and regional authorities – a particular paradox since savings banks tend to be owned by the local governments themselves. Cooperative banks, known as Volksbanken in German, are owned by their members, which could also include municipalities.

Effectively, that means local governments are paying the fees to themselves.

Savings and cooperative banks find their origin in the 19th century, when local governments or cooperatives tried to promote savings among ordinary citizens.

The bizarre situation of municipalities paying a fine for depositing money with banks is only going to get worse over the course of this year, due in part to a change in the deposit-guarantee rules in Germany. Starting in October, commercial banks will reduce the amount that deposit holders can receive back when a bank goes bust: Professional customers, which include companies, hospitals and municipalities, will no longer enjoy a deposit guarantee of at least €1 million ($1.1 million). Instead, their holdings will only be secure up to €100,000, the current limit for consumers.

Commercial banks are changing their deposit insurance terms after having to pay out large sums in several instances. They paid €2.7 billion when Canadian Maple Bank went bankrupt, and more than €6 billion in the case of the German subsidiary of Lehman Brothers. But the new deposit insurance rules are putting cities and municipalities in a tight spot. Most have to park large sums of money with banks – significantly more than €100,000.

The limitation to €100,000, however, does not truly apply to savings and cooperative banks, because these institutes also enjoy separate protections through their own national network. Germany’s nearly 400 savings banks and 1,100 cooperative banks each have a national association, through which they have pledged to bail one another out, if necessary. As a result, it will become attractive for municipalities to move their funds from commercial banks to savings and cooperative banks, where their money is safer.

“We are already seeing some movement away from private banks to savings banks,” Liane Buchholz, president of the Westphalian Savings Bank Association, said recently.

Ironically, this is not necessarily a good thing for the smaller banks, while commercial banks, normally happy to receive deposits, may actually welcome the outflows. Faced with the ECB’s money flood in the form of its bond purchasing program totaling €1.5 trillion, they had too much cash to begin with. Given that dynamic, fees on deposits in Germany are only likely to go up further over the rest of this year.


Elisabeth Atzler has been a banking correspondent of Handelsblatt since 2012. Eike Hoppmann is a trainee and also contributed to this report. To contact:

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!