Amid the coronavirus pandemic and deepening financial crisis, the number of banks charging customers negative interest rates in Germany has accelerated. At least 80 banks now reportedly charge negative interest rates, 16 of which apply this policy to even small deposits.
Also read: IMF Declares Global Recession, 80 Countries Request Help, Trillions of Dollars Needed
Increasing Number of Banks Charging Negative Interest Rates in Germany
The Germany banking sector is facing a tough time as the number of covid-19 cases continues to surge. New data released by the European Central Bank (ECB) last week shows that banks in the eurozone were already suffering from declining profitability even before the coronavirus crisis, with German banks being the least profitable.
Throughout it all, banks in Germany are increasingly charging customers negative interest rates. According to consumer product comparison portal Verivox, 80 banks have published negative interest rate policies on their websites or price lists. This represents a significant increase from the 41 banks that were charging negative interest rates in February, as news.Bitcoin.com reported. Verivox Managing Director Oliver Maier commented:
In the coronavirus crisis, the trend towards negative interest rates accelerated noticeably.
In addition, the media has reported that 22 other banks in Germany have announced that they are charging some customers negative interest rates but have not published their policies online, Verivox detailed.
By examining about 800 banks in Germany, the comparison portal found that most of the 80 banks that are charging negative interest rates do so to large accounts, but 16 of them also apply the negative rate policy to deposits below 100,000 euros ($109,295). This number has doubled from February when only seven banks applied negative rates to small accounts. Different banks have different policies on what specifically they are charging, which are often shown in their account terms and conditions.
ECB Negative Rate Policy and Banks Charging New Customers
The ECB has held its main deposit rate at a historic low of -0.5%. The European Central Bank rolled out negative rates in 2014 for 19 countries in the eurozone to boost business and consumer lending in an effort to spur economic growth. However, the policy has dragged on, forcing some banks to pass on the burden of negative interest rates to their customers.
Due to a court ruling in June 2018, banks in Germany can only apply negative interest rates to new customers, not existing ones. The court case involved Volksbank Reutlingen, a bank in the southwestern state of Baden-Württemberg, which sought to impose a -0.5% interest on existing checking and many savings accounts exceeding €10,000, alongside normal fees.
Since the bank did not provide any additional service in exchange for the penalty rate, the judge ruled that the double pricing of an identical service unreasonably disadvantages customers and is therefore inadmissible. However, the ruling only applied to existing accounts, so banks can apply negative rate policies to new accounts.
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