# Negative rates for small savers in Germany - how long before it gets to Ireland?



## NoRegretsCoyote (28 Nov 2019)

> A co-operative bank has become the first German lender to pass on the cost of negative interest rates to new retail customers with small deposits, in the latest sign of how the European Central Bank’s policy is upending the country’s banking sector.
> 
> Volksbank Fürstenfeldbruck, which is located 30km west of Munich and has just €1.8bn in assets, said that it will collect a “depositary charge” of -0.5 per cent on instant access savings accounts with deposits of €1 and above.



In the FT. 

How long before this happens in Ireland?


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## Lightning (28 Nov 2019)

Generally negative rates have, thus far, only being applied to business deposits and in some cases, in other countries, to very large personal deposits. 

It's a big step for a bank to charge negative rates on small personal deposits that will anger a lot of people. 

The next step in the evolution of negative rates, in Ireland, is probably some bank applying negative rates to very large personal deposits, perhaps over 1 million like has occurred in other countries.


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## Zebedee (28 Nov 2019)

I agree.

Even if the negative rates are small (eg -0.1pc) it seems to make a huge psychological difference in the minds of ordinary punters (with smaller amounts) as they see themselves as being “robbed”. They may see the “under the bed” option as being more attractive. So the banks may see (collectively) a lot of outflows which from a liquidity viewpoint they may not want to happen.

This all assumes that the banks IT systems are able to cope with negative rates. (Brave assumption). 

Alternatively they could just jack up all their charges to cover any collective negative interest cost!


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## Protocol (4 Dec 2019)

I see that many CU are putting limits on shares/deposits.

In this context, aren't the State Savings rates becoming more attractive?

1.0% - 1.5% net is good in the context of 0% ECB rates, negative deposit rates, and CU limits.


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## 24601 (4 Dec 2019)

Protocol said:


> I see that many CU are putting limits on shares/deposits.
> 
> In this context, aren't the State Savings rates becoming more attractive?
> 
> 1.0% - 1.5% net is good in the context of 0% ECB rates, negative deposit rates, and CU limits.



What State Savings option pays anything for on-demand money?


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## cpt_boom (4 Dec 2019)

I'm wondering if the Banking Levy will have any effect on Irish bank interest rates next year.

From my reading, 2019 is the base year for the last year of the levy in 2021 (assuming it's not extended). In 2021 it will charged at 170% x 2019 DIRT collections. So for a bank to offer a rate of 0.3% in 2019 costs an additional 0.18% (0.3% * DIRT @ 35% * 170%). In 2020 the additional cost will be gone, if the levy isn't extended. Will savers see any benefit in interest rates? I'm skeptical...


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## Lightning (4 Dec 2019)

The banking levy has definitely being a factor in the deposit rate reductions.


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## Sarenco (4 Dec 2019)

CiaranT said:


> The banking levy has definitely being a factor in the deposit rate reductions.


And the withdrawl of Rabo and others from the Irish deposit-taking market.


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## Lightning (24 Jan 2020)

The FT reports that more banks are on the verge of passing on negative rates to retail customers with large balances ...



> Two chief executives of large eurozone banks said they were also working on plans to pass the cost of negative rates on to a much larger chunk of retail savers, setting the stage for a political backlash that the banking industry hopes will lead to wider public awareness of the ECB’s policy. So far the majority of banks have charged a fee only to corporate depositors and wealthy clients with balances over €1m, but the executives said this could be extended to all customers with more than €100,000, the limit for most deposit guarantee schemes in Europe



The plan seems to be to gradually reduce the threshold over time by which negative rates apply ...



> “The whole market is looking at this,” said one of the executives. “Over time, we need to decrease the threshold at which we charge.”


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## RedOnion (24 Jan 2020)

Not my area, but my understanding is that any move to impose negative rates on consumers in Ireland requires CBI approval.


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## Lightning (24 Jan 2020)

RedOnion said:


> Not my area, but my understanding is that any move to impose negative rates on consumers in Ireland requires CBI approval.



Do you have a source for that? First I have heard of that. 

Irish banks already have negative rates in place for business clients.


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## RedOnion (24 Jan 2020)

@CiaranT
I understand that it's considered to be a charge, so falls under section 149 of the Consumer Credit Act 1995, for consumers.

Again, not the parts of legislation I read for fun, so I'm not certain on it.


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## Lightning (25 Jan 2020)

Interesting, thanks.


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## easy rider (30 Jan 2020)

Not sure on the central bank approval, per below from Michael Noonan says interest rate charge not included in section 149.

."Section 149 does not apply to interest rates; it applies to fees, charges and commissions only."

Central Bank does not control Mortgage Interest Rates so why Negative Interest? For example on Standard Variable Rate Mortgage, ECB drops their rate but Irish banks choose not to pass it on, is that not a charge? Central Bank has said before they have no power to stop banks increasing mortgage rates as they don't approve them...why is it different for negative? 









						Bank Charges
					

Bank Charges Dáil Éireann Debate, Thursday - 20 February 2014



					www.oireachtas.ie


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## RedOnion (30 Jan 2020)

easy rider said:


> why is it different for negative?


And yet if you read the terms and conditions of any if the banks that have made allowance for negative rates, you'll see that they specifically call out that the condition dies not apply to consumers (hint - to comply with S.149)

You need to dig into the bowels of banking legislation to find a definition of "interest". I haven't done it, but you'll find something like 'a fee charged on the temporary use of money', or something like that. You can't charge a negative amount, so there is no such thing as negative interest in banking legislation. Rather it's a charge. Technically a 'safekeeping' charge. Therefore falls under s.149 for consumers.


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## easy rider (30 Jan 2020)

Yes. It's not mentioned from what I can see, probably did not expect to need to legislate for, sure Ulster Bank systems can't even apply it. but interest rates are mentioned and central bank advised 149 does not apply to interest rates in multiple questions from politicians in Oireachtas committees when politicians complain about rates increasing. Negative credit interest, is it not an interest rate?

Banks already pass on negative interest without central bank approval,  once they are only passing on the rate/charge from a third party and not making a revenue from it, i.e. ECB, so they do apply -50bps for example on EUR deposits ( 149 allows a charge pass on). Once you call it a charge these rules then apply.

So tomorrow consumers could be informed they will be 'charged' in a months time NCI -50bps and Central Bank can do nothing on that basis,  as it's considered a charge. 

AIB charge -65bps to some corps on certain balances, so they have gone above the pass on of -50bps, that's where it's interesting, they have gone above the pass on but did they get central bank approval? Heard nothing about it and they never stated it either in their comms in the press or central bank saying they allow it. Usually politicians would jump on that due to fear of SMEs/consumers being next. I guess central bank would want to call it a charge so at least after the 'pass on' banks could apply they can stop anything on top.


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## RedOnion (30 Jan 2020)

easy rider said:


> AIB charge -65bps to some corps on certain balances, so they have gone above the pass on of -50bps, that's where it's interesting, they have gone above the pass on but did they get central bank approval?


We're talking about CONSUMER Credit Act. It doesn't apply to corporates.
Nor does it apply to individually negotiated fees & charges, which again corporates would be.


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## easy rider (30 Jan 2020)

Unfortunately Section 149 is for both consumer and corporates, banks have to apply for Central Bank approval for charges for both under section 149. It really should be only for consumers but the wording of the Act was poor and that means Corporates are included.









						Review Of The Regulation Of Bank Charges In Ireland - Financial Services - Ireland
					

The Department of Finance has published its review of the regulation of bank charges in Ireland.




					www.mondaq.com
				





"No proposals were made to limit the scope of Section 149 approvals to consumers and small to medium size enterprises. Therefore, the anomalous situation of applying Section 149 to international banks and those serving large corporates only will remain. We believe there was a missed opportunity for this issue to be addressed in the review and it is a shame that no recommendations were made in the published results to address this anomaly in the regulation of bank charges."


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## RedOnion (30 Jan 2020)

Ah, fair enough. The application isn't defined for the whole section. It's not my strongest piece of legislation.

But the negative rates are still individually negotiated, or a direct pass through of a market rate, and therefore not covered.


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## easy rider (30 Jan 2020)

"Each credit institution shall, within three months, notify the Director of all charges imposed by it in relation to the provision of any service to a customer or to a group of customers."

Yeah, it's that section above where it says customer and not consumer. Really should have said consumer, someome made a boo boo and never admitted it.

Negotiated charges, which is essentially a waiver of 149 to not have a set limit/ceiling on a charge that hey can't go over, still needs to be approved/rejected by central bank, they have to approve the fact that a bank wants to negotiate this charge with their customers, the charge has to be explained by the bank to them, if approved evidence has to be kept of each individual negotiation by the Credit Institution.

A lot of large corps actually go onto standard fees of large international banks fee list, they could have 100+ different charges but maybe a few are negotiated but usually down from a max charge that Central Bank approved via 149 and not the negotiated/waived route.

BOI have gone beyond the pass through of the market rate which is -50bps. So either the central bank approved Bank of Ireland to allow them to negotiate NCI for corps or they never sought it as they believe Interest Rates are not covered under the Act and not considered a charge, but an interest rate, negative or otherwise.


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## RedOnion (31 Jan 2020)

Ok, I might be wrong on this. Or at least wrong on the reasoning behind it.


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## Lightning (2 Feb 2020)

2 of the biggest Dutch banks are applying negative interest rates to large personal deposits. 

ING are applying -.50% to personal deposits over 1 million EUR. 

ABN Amro are applying -.50% to personal deposits over 2.5 million EUR. 

More here.


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## Lightning (12 Feb 2020)

It's spreading ... RaboBank are now applying -.50% to personal deposits over 1 million EUR.


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