Despite negative interest rates, more and more deposits are flowing into banks

D.he banks and savings banks in Germany are trying in vain to stave off the influx of deposits. They pass on the negative interest they have to pay the European Central Bank (ECB) for the funds they hold there to companies and now increasingly also to private customers. But they are not deterred by this, although the limits above which they have to pay interest have in some cases already dropped to 10,000 euros. On Friday, the cooperative association, which is the largest auditing association in the cooperative financial network with 360 affiliated Volksbanks and Raiffeisenbanks, reported a “drastically accelerated influx of deposits”.

The exceptional situation caused by Corona led to an increase in deposits by 20.6 billion to 374.0 billion euros in the first three quarters. This means that growth of 5.8 percent is already higher than the 5.4 percent in 2019 as a whole, said the association based in Frankfurt. This confirms the expectation that the German savings rate, which is already high compared to other European countries, will jump up in 2020.

In spite of the extremely low interest rates, the increase in daily money is even 9.8 percent to 269.3 billion euros. “That speaks in favor of a strong prioritization of security and liquidity by consumers, but also a reluctance to spend when it comes to spending,” said the association’s chairman, Ingmar Rega, of the development. The share of sight deposits in total deposits is 72 percent after the third quarter compared to 69.4 percent at the end of 2019.

More than 300 banks with negative interest

For the period from the beginning of the year to the end of July, the Bundesbank’s statistics show an increase in sight deposits in the German banking industry of more than 8 percent to 2.55 trillion euros. At the major banks, including Deutsche Bank, Commerzbank and Hypo-Vereinsbank, they increased by 6 percent, at the savings banks by 8 percent and at the Volksbank and Raiffeisenbanken by a good 7 percent.

In the meantime, the wave of negative interest rates that is currently rolling towards savers has gained significant momentum in recent weeks. In October alone, more than 20 banks and savings banks have introduced a so-called custody fee for private deposits on the daily or current account, reports the comparison portal Biallo. In total, there are now more than 300 institutions in Germany with a custody fee on customer deposits, 214 of them also in the private customer area.

Most of the time, the negative interest rate is identical to the European Central Bank’s negative deposit rate of minus 0.5 percent per year. But there are also a handful of banks that demand more. The institute with the highest negative interest is currently Bank 1 Saar, a cooperative bank from Saarbrücken. They charge 0.75 percent per year for deposits of 10,000 euros that were opened after March 27, 2020. For accounts that existed before March 27, the negative interest rate is 0.5 percent with an exemption of 250,000 euros per account.

According to the cooperative association, a peak in the inflow of funds was reached in the second quarter with an average of 4 billion euros per month. Thus, the change compared to the first quarter – during the lockdown phase – was 3.4 percent. In the first quarter it was only 0.5 percent. “In addition to the precautionary motive, between April and June there is likely to be another reason that the possibilities to spend money on consumption or travel were relatively small due to the restrictions on public life in the course of combating the spread of the virus,” the association speculates.

The CEO of Rega expects a stable, if not accelerated, inflow in the fourth quarter in view of declining growth forecasts. He pointed out that savers would accept compromises in profitability with their investment behavior, and recalled the advantages of a broader diversification, for example through securities savings.


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