After five years of negative rates imposed by the European Central Bank (ECB), German lenders are breaking the last taboo: charging retail clients for their savings starting with very first euro in the their accounts.
While many banks have been passing on negative rates to retail clients for some time, they have typically only done so for deposits of 100,000 euros (US$111,792) or more.
That is changing, with one small lender close to Munich planning to impose a rate of minus 0.5 percent to all savings in certain new accounts. Another bank in the east of the country has introduced a similar policy and a third is considering an even higher charge.
The lenders are preparing for a prolonged period of negative rates as Europe’s economy slows.
In September, the ECB reduced the deposit rate to minus-0.5 percent from minus-0.4 percent, making it more expensive for banks to park their excess cash there.
While there are some exemptions under the policy, years of sub-par profitability have left especially smaller lenders with few options to offset the cost of the ECB’s charges.
“The floodgates are open,” said Friedrich Heinemann, who heads the department on Corporate Taxation and Public Finance at the ZEW economic research institute in Mannheim. “We will soon see a chain reaction.”
German lenders have long resisted passing on negative rates to retail clients, concerned that they would face reputational damage in a country where people save far more of their disposable income than elsewhere in Europe.
The country’s savings rate was about 10 percent in 2017, almost twice the euro-area average, according to Deutsche Bank AG.
Lenders that pass on the ECB’s charges typically do so only for large corporations or wealthy clients, and for deposits above a minimum threshold.
Now Volksbank Raiffeisenbank Fuerstenfeldbruck, a regional bank close to Munich, is among the first brushing off such concerns.
The bank says it plans to impose a negative rate of 0.5 percent on new clients who open a popular form of saving account.
The negative rate “is set by the ECB,” the lender said in a statement. “We have to park the new client money somewhere.”
Kreissparkasse Stendal, in the east of the country, has a similar policy for clients who have no other relationship with the bank.
Both lenders levy the charges on new customers who open a type of savings account that allows for daily, unlimited withdrawals, a popular instrument among German savers.
Existing customers are mostly exempt at the moment.
“For now, negative rates are probably a signal to new clients that a bank doesn’t need any additional deposits,” said Isabel Schnabel, a professor at the University of Bonn who was nominated by Germany to join the ECB’s executive board. “I would assume that banks are a lot more cautious with existing customers.”
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day