Saturday, August 13, 2016

Your Bank Balance Fee IS Negative Interest

OK... so a tiny German bank has started charging a negative interest rate, you pay to store what becomes their asset in their bank...
When the European Central Bank introduced a negative interest rate on lenders’ deposits two years ago, few thought things would ever go this far.
This week, a German cooperative savings bank in the Bavarian village of Gmund am Tegernsee -- population 5,767 -- said it’ll start charging retail customers to hold their cash. From September, for savings in excess of 100,000 euros ($111,710), the community’s Raiffeisen bank will take back 0.4 percent. That’s a direct pass through of the current level of the ECB’s negative deposit rate.
If you charge a premium on interest paid depositors in the past, do you do the reverse?  So if this bank charges depositors 4% (I know, just for instance), do they pay people who borrow 2%?

If the point of charging savers is to get savers to spend, or get borrowers to spend, then do borrowers get 2% for borrowing those excess reserves off the banks books?  It makes perfect sense, given the circumstances, and some Nordic banks do exactly this.  So.  We have instances, will it spread?

Well, it already has.  BofA charges $9/month for a no-service account.  Recall circa 2009 when they first did that and everyone screamed?  They first made it optional.  Now it is not.  You've been paying banks to keep your tally for years.

 Feel free to forward this by email to three of your friends.


Anonymous said...

Hi John,

I live in a Nordic country but I have never heard of a bank other than the central bank that offers negative interest rates.

Please tell me which bank and I will go and take out a big loan.


John Wiley Spiers said...

What makes you think you would qualify for any loan, let alone a big loan? Just because the interest rates are negative, does not mean they want to get rid of the money, it is just they are looking for more qualified customers at that price. It is a aspect of inflation.

Here is an article on banks now paying customers interest, something I posted a couple of months ago...