Trade Republic paying 4% on deposits up to €50,000

Brendan Burgess

Brendan Burgess

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www.rte.ie

Trade Republic to offer 2% interest on cash balances

Share trading and savings platform Trade Republic has launched a new savings product here which will see it applying the full 2% interest on deposits from the European Central Bank to its customer cash balances.
www.rte.ie www.rte.ie

You don't need to trade - you can just open an account.

They are brokers, but benefit from the €100k deposit guarantee.

Brendan
 

Trade Republic: Invest in stocks, bonds & ETFs

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How is my money protected?

All funds in the cash account are legally protected up to €100,000 per investor. They are held in an escrow account at one of our partner banks. These currently are Citibank Europe plc and Deutsche Bank. Deutsche Bank is subject to supervision by the Deutsche Bundesbank and the BaFin (Federal Financial Supervisory Authority Germany). Citibank Europe plc is supervised by the Central Bank of Ireland.

The securities in your custody account are not covered by the deposit guarantee scheme, they are your property instead. They are deposited by our custodian bank HSBC Germany in the corresponding depositories in Germany and abroad. Therefore, the securities belong to you for all purposes.
 
"Trade Republic is not a bank and does not conduct deposit taking. We are a German securities trading platform and investment firm"

Deposits still covered by the deposit scheme, but I wonder are there any other ramifications with it not being a regulated bank ? The only thing I can think of is that they may not apply DIRT automatically.
 
How do they do this? Does each individual get a cash account opened in their own name in Citibank or Deutsche? I can't imagine this is the case. So how exactly am I as depositor getting the protection of the DGS if I give my money to Trade Republic? All the website says is that the cash is held in an escrow account which I have to assume is pooled. How would I make a claim against Citi or Deutsche under the scheme if Trade Republic went bust? I am assuming that in the case that Trade Republic goes under, you are relying on all investor cash being in the escrow account and the account is properly segregated from the rest of the of the business and is fully available to meet deposit obligations.

Not sure how they can claim that this is not deposit taking either. It is.
 
RedOnion said:
@Sunny
Yep, pretty much as you've outlined.

The Deposit guarantee is from Deutsche / Citi, not Trade Republic. So the guarantee covers if Deutsche / Citi goes bust.

If Trade Republic were to go bust, the guarantee doesn't come onto it at all, you're relying on the funds being in the escrow account.
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How does one verify that their funds are in said escrow account?
 
RedOnion said:
@Sunny
Yep, pretty much as you've outlined.

The Deposit guarantee is from Deutsche / Citi, not Trade Republic. So the guarantee covers if Deutsche / Citi goes bust.

If Trade Republic were to go bust, the guarantee doesn't come onto it at all, you're relying on the funds being in the escrow account.
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Am I right in thinking you/I would be a creditor of Trade Republic. In the event of them going bust you wait in line with all other creditors. Nothing is guaranteed, no priority as would be the case of a bank failed.

As for the (third party) deposit guarantee scheme I don't think it can provide much comfort either. None of us automatically get Citi Bank accounts if we open a Trade Republic trading account. TradeRepublic would get the first 100k back of Citi went bust. There only way my 100k would be anyway safe is if I was the only customer with Trade Republic.
 
skrooge said:
Am I right in thinking you/I would be a creditor of Trade Republic. In the event of them going bust you wait in line with all other creditors. Nothing is guaranteed, no priority as would be the case of a bank failed.
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No, the deposits would be segregated and always belong to you, not Trade Republic.

skrooge said:
As for the (third party) deposit guarantee scheme I don't think it can provide much comfort either. None of us automatically get Citi Bank accounts if we open a Trade Republic trading account. TradeRepublic would get the first 100k back of Citi went bust. There only way my 100k would be anyway safe is if I was the only customer with Trade Republic.
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It should be set up properly so that each individual client within the funds is guaranteed. Its the same way as a solicitors 'client account' operates, each of the individual beneficiaries to the account are covered, not the total balance.
 
You get your own German account/Iban with DeGiro so can't see why it would be any different with Trade republic.
 
Laughahalla said:
You get your own German account/Iban with DeGiro so can't see why it would be any different with Trade republic.
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Is that not different though. DeGiro has a banking licence within the group. I can't imagine Citi or Deutsche opening cash accounts for individuals on the back of due dilligence done by trade republic...

Sorry, crossed with RedOnion....
 
Rasputin said:
"Trade Republic is not a bank and does not conduct deposit taking. We are a German securities trading platform and investment firm"

Deposits still covered by the deposit scheme, but I wonder are there any other ramifications with it not being a regulated bank ? The only thing I can think of is that they may not apply DIRT automatically.
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Regarding deposit tax, see https://support.traderepublic.com/en-ie/1512-How-can-I-earn-interest-on-my-cash-balance (here).

"A capital gains tax is withheld for all customers in Germany. For international customers, no taxes are withheld on interest. It’s up to you to declare interest income in your tax return according to your local tax laws."

i.e. no deposit tax for Irish customers, but obviously the gross amount needs to be declared to the Revenue.

BTW, great to see 2.00% instant access being paid.
 
Yes, but perhaps you could caveat their listing in the Best Buys. It's not completely clear that the guarantee on their interest-bearing account is really as strong as the guarantee on a direct deposit account with an actual bank -- even allowing for their escrow and individual guarantee arrangements with a real bank.
 
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How does this activity (i.e. where your money is held) compare with what raisin.ie do? I am saving for a mortgage and am trying to find the best rates for the savings I have to mitigate inflation as best I can. Best so far Looks to be what is on offer from raisin or bunq easy savings account
 
MugsGame said:
Yes, but perhaps you could caveat their listing in the Best Buys. It's not completely clear that the guarantee on their interest-bearing account is really as strong as the guarantee on a direct deposit account with an actual bank -- even allowing for their escrow and individual guarantee arrangements with a real bank.
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In the event of the invocation of the Deposit Guarantee Scheme, Citi Ireland and Deutsche Bank would need to detail who is entitled to compensation to the Central Bank of Ireland.

I would have full confidence that Citi and DB have proper records as to the beneficial owners. They are 2 large regulated banks and they would have this type of information.
 
I think the concern is about how the escrow arrangement would work were Trade Republic to fail; the deposit guarantee only covers failure of the deposit-taking bank.

We've seen liquidators access "client" funds/assets before where there was supposed to be segregation; there are definitely more unknowns here than directly depositing with a bank.
 
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