Saturday 20th November 2021
“Economic Nirvana”
Banks can have a hard time ruling on penalty interest rates
From Laura Eßlinger
A ruling by the Berlin regional court calls the business policy of many financial institutions into question: According to this, Sparda Bank wrongly demands negative interest rates on current and overnight accounts. A banking lawyer expects that the Berlin judgment will not remain an isolated case.
If the Berlin judgment were to stand, it would shake up the German banking sector: According to the judges, Sparda Bank Berlin is demanding inadmissible negative interest rates from its customers. Affected are consumers who have an overnight or current account and have parked more than 25,000 euros there.
According to the court, Sparda Bank now has to “repay the negative interest rate of 0.5 percent at its own expense” to its private customers. The regional court ruled that the cooperative bank charges custody fees “is not compatible with the essential basic ideas of the legal regulation”.
The Federation of German Consumer Organizations (VZBV) had filed a lawsuit – and the judge’s verdict is now a complete success. “The verdict is the most far-reaching judgment so far on the subject of custody fees,” says consumer advocate boss Klaus Müller.
Four other banks sued
The ruling could actually have far-reaching consequences for customers and banks, as more and more customers are affected by the penalty interest. According to the financial portal Biallo, 525 financial institutions in this country now collect custody fees, which corresponds to about a third of all banks and savings banks. They are due for new customers; the banks try to reach certain agreements with existing customers.
The VZBV is therefore suing financial institutions in four other cases. VZBV does not want to say against whom exactly. Similar proceedings are in progress in Hesse and Saxony. “We deliberately chose different places of jurisdiction for our lawsuits. The aim is to provide a fundamental clarification,” said Müller to “Capital”. The safekeeping of deposits in the current account is not a special service for which a bank can charge something. Because without keeping money, no current account can be operated. If necessary, the VZBV wants to go to the Federal Court of Justice (BGH).
Banking expert warns of destabilization
Bank expert Hans-Peter Burghof criticizes the decision of the Berlin court. “With the verdict, the court is moving into an economic nirvana,” said the professor of banking at the University of Hohenheim to “Capital”. “If this is decided across the board, we will destabilize our banks and undermine the market economy.” If banks are no longer allowed to pass on negative interest rates, the classic bank deposit cannot exist as a product, says Burghof, “at least not without state subsidies”.
With the decision, the court separates the banking conditions from the actual market conditions. “I can’t force a baker to sell rolls for 10 cents even though he produces them for 20 cents.” Banks and savings banks justify the introduction of negative interest rates with the ongoing low interest rates and the negative interest rate of 0.5 percent that they have to pay to the European Central Bank for short-term deposits.
Daniela Bergdolt, specialist lawyer for banking and capital markets law, does not accept this argument – and refers to the allowances that the ECB grants banks for parked money. “The banks do not provide any information about how high these allowances are,” Bergdolt told “Capital”. “They also have to take that into account with their customers, and they don’t.”
Back payments in the four-digit million range?
Sparda Bank Berlin has first appealed the judgment. With that, the case goes to the Higher Regional Court. The judgment completely contradicts previous case law and would hit the entire industry, says a Sparda Bank spokesman for “Capital”. In Saxony and Baden-Württemberg, for example, courts had ruled in favor of the financial institutions.
Banking lawyer Bergdolt expects that the Berlin judgment will not remain an isolated case. “Once the bastion is broken, there are usually other court judgments that are similar.” Only the BGH could finally decide whether financial institutions are allowed to charge negative interest rates on current and overnight money accounts. As long as the judgment means great uncertainty for banks and savings banks.
If it turned out in the end that the penalty interest was unlawful, they would face back payments in the single-digit billion range, according to the assessment of banking expert Burghof. “They would then try to generate income elsewhere, for example through higher account fees,” said Burghof. And: Banks could also have to merge in order to be able to refinance more easily via the capital market. “The bigger a bank, the cheaper it can issue bonds,” explains Burghof.
The lawyer Bergdolt advises affected customers to object to negative interest charges as a precautionary measure. The BGH ruling on unlawful account fees from the spring showed how important this is. “We are currently arguing about the question of how many years the banks will have to reimburse fees for and to whom,” says Bergdolt.
This text is at first Capital appeared.