Friday December 31, 2021
From 5000 euros
Negative interest rates reach small savers
While there is a dispute in court about whether negative interest rates are even permissible for private customers, many banks and savings banks are tightening their “custody fees”. For a long time only large financial assets of 100,000 euros or more were affected, now some small savers also have to pay.
Bitter times for savers in Germany: According to data from the comparison portal Verivox, around every third of around 1,300 credit institutions evaluated now demand negative interest rates above a certain amount. “Negative interest rates have become a mass phenomenon and have long since reached the average saver,” said Oliver Maier, managing director of Verivox Finanzvergleich GmbH. Accordingly, at least 423 banks and savings banks charge private customers a so-called custody fee on overnight, current or clearing accounts. That is 245 more than a year ago.
According to data from the consumer portal Biallo from mid-December, just under 550 financial institutions are charging negative interest rates on private assets. In 2021, according to this information, almost 300 institutes introduced a custody fee for credit balances on the overnight or current account. For a long time, negative interest was due, especially for large sums of 100,000 euros or more. According to Verivox, it is also increasingly affecting average savers. At least 155 banks calculate the custody fee from a total balance of 50,000 euros or less. More and more often, the negative interest would also be due for smaller sums of 5,000 euros or more.
In the course of 2021, 90 institutions tightened their existing negative interest rates. They reduced tax exemptions or pushed interest rates even deeper into the red. Most savings banks and banks base the amount of the custody fee on the interest of 0.5 percent that they have to pay on part of their excess deposits when they park them at the European Central Bank (ECB).
Open litigation
According to Verivox, 19 banks go beyond that and charge at least some of their customers negative interest rates of 0.55 to 1 percent. “With such defensive conditions, the banks close the bulkheads and try to protect themselves from the inflow of further savings,” said Maier. Since June 2014 commercial banks in the euro area have to pay interest when they park money with the ECB. This deposit rate – known in technical jargon as the deposit facility – is currently minus 0.5 percent. For some time now, the central bank has been granting allowances for certain sums in order to relieve the institutions.
Whether banks are allowed to charge negative interest rates is legally controversial. The custody fees mainly affect new customers. If a financial institution wants to demand negative interest from existing customers, it has to agree this individually with those affected. Consumer advocates generally consider negative interest rates on private credit balances on current and overnight accounts to be inadmissible. The Federation of German Consumer Organizations has therefore filed suits against various credit institutions and sees itself confirmed by a ruling by the Berlin Regional Court. In the first instance, the court had declared corresponding clauses in the price list of a financial institution to be inadmissible. The verdict is not yet legally binding. The bank appealed against it.
Verivox evaluates the price notices published on the Internet by around 1,300 banks and savings banks in Germany. Since not all institutions publish their negative interest rates freely on their website, more than 423 institutions are likely to charge custody fees. According to the latest data from the Deutsche Bundesbank, the number of independent credit institutions in Germany fell to 1,679 in 2020.