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ECB decision sets direction: Deutsche Bank announces the end of negative interest rates

The ECB’s decision dictates the direction
Deutsche Bank announces the end of negative interest rates

Last week, the European Central Bank announced the first rate hike since 2011. Deutsche Bank and Postbank want to pass this development on to their clients. Commerzbank does not want to commit yet.

Bank customers in Germany can look forward to an end to negative interest rates on current or overnight accounts. “The custody fee amount is based on the European Central Bank’s so-called deposit structure,” comments a spokesman for the largest German bank on the interest rate hike announced by the European Central Bank in July. “If the ECB raises the deposit rate by 0.25 percentage points as per its recent announcement, Deutsche Bank and Postbank will pass this adjustment on to their retail clients and reduce the custodian fee by 0.25 percentage points.”

The Governing Council of the ECB decided Thursday to raise the key interest rates in the euro area by 0.25 percentage points at its next meeting on 21 July. It would be the first increase since 2011. Another step is to be followed in September, which is likely to be even bigger.

Currently, banks have to pay 0.5% interest on their own if they park funds at the ECB. A number of institutions pass the costs on to their customers. “If the deposit rate is brought to zero or positive in a second step, we will no longer charge a custodian fee in the retail banking sector,” the Deutsche Bank spokesperson said.

451 banks to reach

Since mid-May 2020, Deutsche Bank has been charging so-called custody fees in its business with private clients. Currently, customers have to pay negative interest of € 50,000 on checking and investment accounts and € 25,000 for overnight money. It’s the same with Postbank, which belongs to the Deutsche Bank group.

Commerzbank, on the other hand, does not want to specify when it will reduce its custody fees for clients with large deposits. The bank is awaiting the next decisions of the ECB, a spokesman for the Frankfurt institution said on request. Commerzbank chief Manfred Knof said in mid-May: “If the ECB reacts, then we can and will react quickly.” Direct bank ING Germany went ahead on May 10 and had pledged to abolish negative interest rates for nearly all of its private clients by July 1.

According to the comparison portal Verivox, at least 451 of the approximately 1,300 rated banks in Germany currently require negative interest rates from private customers (as of June 8, 2022). The Biallo Internet portal even has 582 banks and savings banks that collect negative interest from private customers (as of 9 June 2022).

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