In response to the Bank of England setting interest rates at a record low
0.25% at its last meeting, the Royal Bank of Scotland sent out letters
informing some large depositors that negative interest start on Monday.
Postbank, a subsidiary of Deutsche Bank, will charge depositors €3.9 per
month starting November, in response to the ECB’s negative interest rate
policy.
This is more money out the window for depositors. At the end of this
article I have a roundup of banks offering negative interest rates on deposits.
RBS and Postbank Begin to Charge Customers for Deposits
El Economista reports RBS and Postbank Begin to Charge Customers for Deposits.
Royal Bank of Scotland (RBS), an entity in which the British Government
controls a 72.6% stake, will begin charging its institutional customers for
their deposits in the bank in order to cope with the last rate reduction interest
held by the Bank of England (BoE) on August 4. In addition, two other German
companies will do the same to cushion the negative rates implemented by the
ECB.
According to the newspaper Financial Times, RBS has sent a letter to
certain corporate customers of its investment banking division in which
indicates that negative interest rates will apply from next Monday.
The negative interest rates affect customers operating in futures and
options and therefore maintain deposits as collateral, said the British head
a knowledgeable banker plans of the entity.
In the letter, RBS argues that so far have remained at 0% deposit rate,
but the time has come where they can not “hold” this level, so begin applying
negative interest rates.
Not the Only One
Also, the German bank Postbank, a subsidiary of Deutsche Bank, will charge
€3.9 per month to customers to keep their current accounts in order to offset
the negative interest rates of the European Central Bank (ECB), reports
Reuters.
Ulster Bank, the Irish lender which is part of RBS, also imposes negative
rates on large corporations, but does not apply such charges to small
businesses or individual customers.
A few days ago German credit cooperative Raiffeisen announced it would
begin applying negative rates on customer deposits in September. The policy
applies to deposits in excess of 100,000 euros.
The cooperative imposes a negative rate of -0.4%, the same rate the
European Central Bank charges for ‘excess’ reserves held at the ECB.
Postbank Scraps Free Accounts for Millions of Customers
Reuters reports Postbank Scraps Free Accounts for Millions of Customers.
Germany’s Postbank, a unit of Deutsche Bank, is to scrap free current
accounts for millions of customers in an effort to offset the burden of the
European Central Bank’s negative interest rates.
“The market environment, especially low interest rates, make it ever
harder to earn money from current accounts,” Postbank board member Susanne
Kloess said in a statement.
From Nov. 1 customers will be charged 3.90 euros ($4.41) a month unless
they have monthly inflows of 3,000 euros or more, in which case they will
still have cost-free access to a premium giro account, Postbank said.
A Postbank spokesman declined to specify how many customers would be
required to pay for their accounts, but said it would be the “vast majority”
of Postbank’s 5.3 million giro account holders.
More RBS Details
The Financial Times has more details in its report RBS to Start Charging Large UK Clients to Hold Cash.
Royal Bank of Scotland is to charge some large corporate customers for
holding their cash, the first sign the Bank of England’s decision to cut
rates to historic lows is forcing lenders to collect negative interest from
deposit holders.
The state-backed bank has written to certain financial institutions in its
investment banking division to warn them it will apply negative interest
rates from Monday, according to a letter seen by the Financial Times.
“As you will be aware, there are a number of currencies which now attract
negative overnight rates for deposits,” the letter from the bank said.
“To date we have been flooring deposit rates at zero per cent but we have
now reached the stage where we can no longer sustain this level of floor. As
a result of the continuing interest rate situation we will be implementing
negative interest rates.”
The changes affect large customers who must hold collateral in both
sterling and euros. Banks are hit by negative rates when they pass through
the European clearing houses.
Although interest rates in the UK are not negative, RBS is now opting to
pass on the cost of the clearing houses’ charges to about 70 institutions
following the BoE rate cut, according to a banker briefed on the plans.
It emerged last month that RBS had written to more than 1m business
customers warning them it could charge for deposits if rates fell below zero.
Ulster Bank, the Irish lender that is part of RBS, already imposes
negative rates on some large corporates.
Ulster has products priced off Euribor, a European interbank lending rate,
which turned negative last year. Ulster’s charges do not apply to small
businesses or personal customers.
The Bank of Ireland said on Friday that it would start charging large
companies to hold their money on deposit later this year, making it the first
domestic Irish lender to impose negative interest rates.
The bank, which is 14 per cent owned by the Irish government, has warned
large corporations and institutions that it will charge 0.1 per cent for
deposits above €10m from October.
HSBC said last year it would start charging other banks for deposits held
in currencies where negative interest rates apply. It confirmed on Friday
that the policy would not change. Barclays also said it had no plans to apply
negative rates.
Landscape Below Zero
The above image from Negative Rates: How One Swiss Bank Learned to Live in a
Subzero World written April 14.
The article notes “Alternative Bank Schweiz AG (ABS) informed its clients
that they would have to pay a charge of at least 0.125% to maintain their
accounts at the bank starting in 2016.”
The $8 trillion cited is out of date. As of July 6, Bloomberg noted Global Negative-Yielding Bond Pile Nears $10 Trillion.
Negative Deposit Roundup
- UK – Royal Bank of Scotland: Negative interest rates on
some large depositors start August 21. One million business customers
notified. Rate not specified
- Germany – Postbank: Postbank, a subsidiary of Deutsche
Bank, will charge millions of depositors €3.9 per month starting
November. “Vast majority” of Postbank’s 5.3 million giro account holders
impacted.
- Germany – Raiffeisen: German credit cooperative
Raiffeisen announced it would begin applying negative rates on customer
deposits in September. The policy applies to deposits in excess of
100,000 euros. The cooperative imposes a negative rate of -0.4%, the
same rate the European Central Bank charges for ‘excess’ reserves held
at the ECB.
- Ireland – Ulster Bank: The Irish lender Ulster Bank,
part of RBS, imposes negative rates on large corporations, but does not
apply such charges to small businesses or individual customers.
- Ireland – Bank of Ireland: The bank will charge large
companies to hold their money on deposit, making it the first domestic
Irish lender to impose negative interest rates. The bank, which is 14
per cent owned by the Irish government, has warned large corporations
and institutions that it will charge 0.1 per cent for deposits above
€10m starting October.
- UK – HSBC. The multinational bank HSBC said last year it
would start charging other banks for deposits held in currencies where
negative interest rates apply.
- Switzerland – Alternative Bank Schweiz AG: ABS informed
its clients last year that they would have to pay a charge of at least
0.125% to maintain their accounts at the bank starting in 2016.
Postbank Comments
I would not be surprised in the least to see Postbank lose millions of
accounts. For the most part, it is the only bank nailing small depositors.
Unlike the other banks going after big accounts, “Postbank customers will
be charged 3.90 euros ($4.41) a month unless they have monthly inflows of
3,000 euros or more, in which case they will still have cost-free access to a
premium account” a Postbank spokesman said.
Those depositors are highly likely to go elsewhere.
Postbank nails millions of small depositors €3.9 monthly. Is
the goal to drive away deposits? If not, the bank may be in serious trouble.
— Mike Shedlock (@MishGEA) August 20, 2016
Financial Repression Continues
People are beginning to see the effects of central banks’ financial
repression, even if they have not yet placed the blame squarely where it
belongs.
The rise of extreme parties on the Left and Right and the Brexit vote are
both direct consequences of failed central banks and government policies that
benefit the wealthy at the expense of everyone else.
The rise in anger and the rise in the price of gold are also a direct
result of an increased belief that central banks do not have everything under
control.
James Traub, a contributing editor at Foreign Policy, says people
are “mindlessly angry”. Actually, Traub is mindless.
For further discussion, please see How the Global Elites Screws Peons (While Media Fools Cheer).
Mike “Mish” Shedlock