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Due to negative interest rates, more and more banks are forced to charge wealthy savers a penalty interest , because otherwise the costs will weigh too heavily on the profitability of banks. In Switzerland, wealthy savers already have to pay interest at some banks above a certain limit, but now German savings banks are also starting to follow suit.
Last year , Raiffeisen Gmund am Tegernsee and de Volksbank Stendal were already in the news with a penalty interest of 0.4% for all savings deposits above €100,000, but now a third bank has been added. The German Handelsblatt writes that Sparda Bank also wants to charge a negative interest rate of 0.4% for wealthy savers.
From September, this bank will also charge a negative interest rate of 0.4% for all savings above €100,000. This penalty interest will be charged quarterly to the roughly 5,000 savers who have more than a hundred thousand euros in their bank account. According to the bank's figures, that's about one percent of all account holders.
Sparda Bank is therefore not the first bank in Germany to pass on the negative interest rate of the ECB, but it is the first major bank to take this bold step. Measured by total assets, it is the fifteenth largest bank in Germany, while the Volksbank Stendal and the Raffeisenbank Gmund come in at 730th and 816th place respectively in the top 1,000 largest banks in Germany.
The ECB's interest rate policy and tightened supervision are putting considerable pressure on the German banking sector. According to calculations by Barkow Consulting, the German banking sector had to pay a total of €1.1 billion in negative interest to the ECB last year. The ECB's interest rate policy mainly affects small savings banks, because they have relatively little income to absorb the penalty interest. As a result, these small banks have to merge to save costs or pass on the negative interest rate to savers. Both effects are undesirable, but no less than a logical consequence of the ECB's monetary policy.
In May, the German Bundesbank published a Reporting on the development of the German banking landscape. It was striking that there were again fewer banks and financial institutions than a year ago and that the number of savings banks in particular declined.
According to Adreas Dombret of the German Bundesbank, this is no coincidence, because the small German savings banks have been hit particularly hard by the crisis. In a speech Earlier this year, he warned that the revenue model of small savings banks is fundamentally affected by extremely low interest rates and increased costs for supervision. The strict supervision, which is intended to keep an eye on large banks , is proving to be a major burden, especially for small and relatively safe savings banks.
Saving is of little benefit to both the bank and savers today. Now that the taboo on negative interest rates has been broken, more banks will probably dare to take the step towards negative interest rates. The fear that savers would then withdraw money en masse was perhaps too premature, because Raiffeisen Gmund am Tegernsee saw the number of account holders increase afterwards. Apparently, there is also a great need among savers for the safety and convenience of savings, even if there are costs involved.
Negative interest rates do mean that more savings will go to alternatives, such as stocks, real estate or precious metals such as gold and silver. Historically, gold benefits from negative real interest rates, a situation where inflation is higher than interest rates.
Negative interest rates at German Sparda Bank
