Germany's second-largest listed lender Commerzbank AG will have to book backward-looking provisions somewhere in the middle double-digit million euro range as a result of a recent Federal Court of Justice ruling on bank fees, CFO Bettina Orlopp said June 17.
In a case against Deutsche Bank AG's retail banking subsidiary Postbank in April, the court declared that certain clauses in general terms and conditions which allowed the bank to increase fees without seeking customers' explicit consent were invalid. These so-called negative consent clauses are widely used by other banks in Germany, which will also need to redraw their agreements and may face reimbursement charges.
German financial markets regulator BaFin has estimated that these charges may reach up to half of the banking sector's annual profits in the worst-case scenario.
The impact of the court decision on Deutsche Bank is estimated at about €300 million, of which €100 million in provisions will be booked in the second quarter, CFO James von Moltke said June 10, adding the ruling is expected to trigger a repricing wave across the banking sector.
This has thrown a spanner in the works for Commerzbank, which was in the middle of planning the introduction of a new pricing model for current accounts, Orlopp told the dbAccess Berlin Conference. As a result, the bank postponed the launch of the new model at subsidiary Comdirect which was scheduled for May 1. The launch of the model across the Commerzbank group is planned for July 1.
Commerzbank is working to change its system to ensure that clients give explicit consent to proposed fee charges, Orlopp said.
This requires a great deal of time and effort even for online banking clients. Although the bank can reach these clients quickly, getting their consent goes beyond setting up pop-up messages on the website. Many clients would decline, and then the bank would have to contact them again to try to convince them to accept the changes, Orlopp said.
Orlopp said she expects to see new price models introduced across the whole banking sector, especially in the current low interest rate environment.
Many German banks have imposed negative interest rates on retail customer deposits and reduced the minimum deposit threshold for charging negative rates at a time when central bank rates are historically low.
A June 16 study by German comparison website Verivox shows that 345 banks in German have introduced negative rates with charging thresholds falling as low as €10,000. A total of 14 banks are even charging negative 0.55% rates on deposits, which is more severe than the ECB's negative interest rate of 0.5%, the data shows. Another 19 banks require fees for their daily accounts, which are typically offered to clients free of charge.
Commerzbank is currently charging negative 0.5% rates on deposits of €100,000, according to Verivox.