The last interest rate cut by the European Central Bank has led to a rapid increase in the number of German banks passing on the burden to clients, including retail depositors, according to a new study by price comparison website Biallo.de.
German banks are more reliant on net interest income, and therefore more sensitive to rate cuts, than lenders elsewhere. They also account for one of the highest amounts of excess liquidity held at the ECB and subject to a negative deposit rate. German lenders in 2018 faced the highest rate-related charges, of €2.84 billion, among eurozone member states, according to estimates from Brussels-based think tank Bruegel.
The European Central Bank cut the deposit rate for banks under its remit by 10 basis points to negative 0.5% in September 2019. Since then, many German banks have started passing on negative rates on a larger part of their corporate deposit portfolios, but there has also been a surge in the number of lenders imposing charges on retail clients. Large privately held banks have imposed charges, and smaller state-owned savings banks and cooperative banks have also joined in.
Since the latest ECB rate cut, the number of German savings and cooperative banks charging retail clients has tripled to around 90 from around 30. The minimum charge-free amount varies from €10,000 to several million euro, according to Biallo.de.
The total number of savings and cooperative banks charging corporate and retail clients now stands at around 190, according to the study.
The lenders avoid calling the charges "negative rates" and often use the term "custodian fees," Biallo.de said. German consumer advocates have criticized many banks because they do not include information about the charges in their mandatory fees reports to clients. The banks themselves say they are not required to report the so-called custodian fees according to rules set out by the German financial supervisory authority Bafin, Biallo.de said. The site noted such fees are indeed not included in the current reporting guidelines on the Bafin website.
In a statement Jan. 13, the German Banking Association BdB called on the ECB to take all possible measures to relieve banks and their customers from the damaging side effects of negative interest rates. The association welcomed the ongoing review of ECB monetary policy, saying such review is urgently needed given that the risks and harm of the low-rate environment become more evident over time.