It was bound to happen sooner or later: Financial institutions applying deposit charges. After several years of subzero interest rates instituted by the European Central Bank (ECB), German banks have finally blinked and now they are taking some haircuts.
According to Bloomberg News, Volksbank Raiffeisenbank Fuerstenfeldbruck, a small regional bank in Munich, is set to slap a -0.5 percent rate on all savings in new accounts. The rate starts with the first euro.
Meanwhile, Frankfurter Volksbank is thinking about charging new customers 0.55% for all their deposits. But the financial institution has not made a final decision yet.
For a long time, banks either imposed negative rates on customers with deposits exceeding 100,000 euros or passed the savings onto borrowers.
Friedrich Heinemann, who heads the department on Corporate Taxation and Public Finance at the ZEW economic research institute in Mannheim, had this warning:
“The floodgates are open. We will soon see a chain reaction. Banks that do not follow with negative interest rates would be flooded with liquidity.”
Germany has one of the highest personal savings rates in Europe. Will this change?
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