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ECB's tiered deposit rate system to benefit Deutsche Bank most, analysts say

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ECB's tiered deposit rate system to benefit Deutsche Bank most, analysts say

Germany's Deutsche Bank AG is estimated to save about €200 million or 10% of its pretax profit in 2020 due to the ECB's recently announced tiered deposit rate, Bloomberg News reported, citing analysts from JPMorgan Chase & Co.

The ECB on Sept. 12 lowered its deposit rate by 10 basis points to negative 0.50% and also introduced a two-tier system for reserve remuneration, exempting part of banks' excess liquidity holdings from the negative deposit facility rate.

The analysts also noted that Commerzbank AG is estimated to save about €100 million, or roughly 6% of annual interest payments, making Germany's two largest lenders the biggest beneficiaries of the new rule due to the high level of deposits they have with the ECB, compared to global peers. The two German giants also have relatively weak profitability, because of which a small amount of savings can substantially strengthen their earnings, according to the newswire.

French lenders BNP Paribas SA and Société Générale SA are set to save 2.1% of 2020 pretax profit, while Crédit Agricole SA is expected to save 2.9%, according to the analysts. Dutch lender ING Groep NV, Italy's UniCredit SpA and Spanish lenders Banco Bilbao Vizcaya Argentaria SA and Banco Santander SA are estimated to save 2.9%, 2.4%, 0.8% and 0.6%, respectively, of 2020 pretax profits. The total relief for the banking system is about €1.7 billion, the analysts added.

Meanwhile, the Association of German Banks, or BdB, said the ECB's proposed regulations to cut fines for parking large amounts of cash with the central bank is expected to provide moderate relief to local banks, helping them save €500 million annually, Reuters reported, citing the German banking lobby.

BdB noted that German lenders will still pay negative interest rates for storing unused cash, according to Reuters.