# Negative Corporate Deposit Rates



## Lightning (19 Aug 2016)

http://www.irishtimes.com/business/...-charge-for-placing-cash-on-deposit-1.2761010



> The Irish Times has learned that Bank of Ireland, which is 14 per cent owned by the State, has informed its large corporate and institutional customers that it plans to charge them for deposits of €10 million or more from October.
> 
> It is understood that a negative interest rate of 0.1 per cent will be applied to such deposits by Ireland’s biggest bank.


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## Protocol (19 Aug 2016)

Is this negative rate high enough to affect the behaviour of large depositors?

Is it high enough to cause them to switch banks?

With 10m average deposit, 0.1% is 10,000 pa.

Will other banks follow?


Another point - given zero interest rate, and now negative interest rates, I see some CU still charging 8% on personal loans........


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## Protocol (19 Aug 2016)

http://www.rte.ie/news/business/2016/0819/810478-postbank/

A large German bank is to restrict free fees, in response to ultra low interest rates.


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## Lightning (19 Aug 2016)

Protocol said:


> Is this negative rate high enough to affect the behaviour of large depositors?
> 
> Is it high enough to cause them to switch banks?



Good questions. I think BoI are testing waters. -0.10% AER variable seems like a tester lower rate. If deposits flee, BoI can reverse. If deposits stay, BoI can go lower. Many European banks charge -0.40% AER variable on large corporate deposits. 



Protocol said:


> Will other banks follow?



Possibly. Blockers are system updates (not all bank systems can handle negative rates) and the fact that some Irish banks need more deposits (high loans to deposits ratio) so they cannot afford to scare customers away.


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## Brendan Burgess (19 Aug 2016)

Protocol said:


> Another point - given zero interest rate, and now negative interest rates, I see some CU still charging 8% on personal loans........



The Credit Unions are in real trouble.  Many of them have enough cash to repay their shares and deposits in full without their lending being affected. 

In the past their model was to get an investment return of 4%  and pay maybe 1% dividend. Now they are getting close to 0% (or maybe even -0.1%!) on their investments, that source of profit is gone. 

Brendan


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## Lightning (19 Aug 2016)

Yeah, if the CU's excess of deposits over loans is sizable then they are in trouble with not getting a return on their excess reserves. If the CU has low excess reserves then it a far lesser issue.


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## Lightning (19 Aug 2016)

The lead story in the FT tomorrow is about negative deposit rates. 

https://www.ft.com/content/90ce80bc-6606-11e6-8310-ecf0bddad227

According to the FT, Ulster Bank are already imposing negative rates on some corporate customers ...



> Ulster Bank, the Irish lender that is part of RBS, already imposes negative rates on some large corporates.
> 
> Ulster has products priced off Euribor, a European interbank lending rate, which turned negative last year. Ulster’s charges do not apply to small businesses or personal customers.


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## TheBigShort (23 Aug 2016)

Protocol said:


> Is this negative rate high enough to affect the behaviour of large depositors?
> 
> Is it high enough to cause them to switch banks?
> 
> ...



Well if other countries banks are moving in that direction, then you would have to consider, where could they go? Without unduly disrupting their business operations?

Perhaps an opportunity for Irish state to start clawing some of that corporation tax back too?


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## Lightning (23 Aug 2016)

TheBigShort said:


> Well if other countries banks are moving in that direction, then you would have to consider, where could they go? Without unduly disrupting their business operations?



As things currently stand, large BoI corporate depositors can move their deposit to PTSB, AIB or KBC and get a positive or zero rate there.


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## Lightning (29 Aug 2016)

Another interesting article on negative rates, this time in the WSJ. (Google the title to read for free).

http://www.wsj.com/articles/german-savers-lose-faith-in-banks-stash-cash-at-home-1472485225?mod=e2tw

This is a reason why negative rates are unlikely to be imposed, in any significant way, on small deposit holders ...



> “The moment the bank tells me I have to pay interest on my deposit I’ll take my €50,000 or whatever it is and put it under my pillow, or buy a safe and stick the money inside,” saidDagmar Metzger, a 53-year-old entrepreneur in Munich.
> 
> Ms. Metzger, a game hunter, said she would also consider squirreling cash away in her gun cabinet, which has solid locks.
> 
> Paying to save is “preposterous,” said Marlene Marek, 58, owner of a Frankfurt bistro. “I would rather withdraw my money and stash it at home, or keep it in a safe-deposit box at a bank.”


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## Lightning (18 Sep 2016)

The Sunday Independent reports that Investec are now charging negative rates on corporate deposits and institutional deposits. 



> In recent months, the South African-owned Investec Bank - which operates here - started to charge its institutional and corporate customers for large deposits kept in its demand and short-term deposit accounts.



KBC are not ruling out doing the same ...



> A spokeswoman for the Belgian-owned KBC said the bank "does not currently" apply negative deposit interest rates to any personal, business or corporate deposits. "KBC reviews all product pricings on a continuous basis," she added.


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## Lightning (13 Jun 2019)

AIB are now charging -0.65% on corporate deposits. BoI are not charging -0.40% on corporate deposits. Source. 

Are PTSB, KBC and others doing the same?


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