When the European Central Bank introduced a negative interest rate on lenders’ deposits two years ago, few thought things would ever go this far.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%?
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 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.
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