The European Central Bank has long had negative interest rates of -0.5% charged to banks that keep their excess reserves at the central bank. The thinking is that this will discourage banks from holding excess reserves and they will instead lend the money out.
Unfortunately, not only are the banks continuing to hold excess reserves, they have now decided to charge their customers negative interest rates to make up the losses:
https://cointelegraph.com/news/german-bank-boosts-bitcoin-negative-interest-rates-hit-every-accountAccording to multiple local press outlets including the Süddeutsche Zeitung on Nov. 19, the Volksbank Raiffeisenbank Fürstenfeldbruck (VRF) in Northern Bavaria is now charging 0.5% negative interest rates on the smallest deposits.
“We had to do it,” the publication quoted the bank’s management as saying.
The reason, they said, was the cost of “parking” money at the European Central Bank (ECB).
In Germany, negative interest rates previously impacted only deposits above €100,000, which constituted an interest-free allowance. VRF’s move makes it the first lender in the country to target savings below that level.
“Recently, more clients have been coming to us from other banks where they’ve already used up their allowance,” the management continued.
If you were a customer in this situation why would you continue to hold money at a bank? Remember that inflation is positive in Germany, so a negative interest rate at the bank combined with inflation in the economy means your wealth gets eroded fast. Better to hold stocks, bonds, real estate or bitcoin.
