German and Swiss Lenders Change Strategy on Negative Rates

(Bloomberg) -- (Machine translation provided by Google and reviewed by Bloomberg editors)

Some smaller banks in Germany and Switzerland are struggling to find the right answer to the negative deposit rates charged by central banks in the region. Several lenders have announced new strategies in recent days. Penalty interest on private customers’ savings were either introduced, canceled or changed.

The latter is the case at Switzerland’s Postfinance AG. It will levy a fee on account balances of 500,000 francs or more as of October 1. The previous limit was 1 million francs. The charge amounts to 1 percent of the money exceeding the threshold.

"Even though we are virtually no longer paying any interest, we have received more than three and a half billion francs in client funds in the past 12 months," Postfinance spokesman Reto Kormann told Bloomberg. "In order to stop the strong inflow of new money and even to get an outflow of customer funds, we must therefore tighten our fee regime." As a state owned bank, Postfinance is not allowed to lend money on its own, he added. "Thus, there are only a few products left to offset the burden of negative interest rates."

Hamburger Sparkasse AG, which is about to introduce penalty interest, also justifies its decision with high costs for liquid funds. "If customers keep large amounts of cash in their checking accounts, it will cost Haspa a lot of money day after day," spokeswoman Stefanie von Carlsburg said. "We estimate that the burden of the low-interest environment in recent years was a high double-digit million euro amount per year."

From September onwards, the lender will levy a fee of 0.4 percent on private savings of 500,000 euros or more. "This fee still does not cover the costs incurred by the ECB’s penalty rate for bank deposits. For example, we also have to pay for deposit insurance," Carlsburg said. The lender was Germany’s largest savings bank by assets in 2017, according to data by the German Savings Banks Association.

Not far from Haspa, Hamburger Volksbank eG has decided to cancel its 0.2 percent penalty rate, which was introduced at the beginning of 2017 for private balances of 500,000 euros or more in some accounts. Customers affected had shifted their money over time, spokeswoman Heidi Melis said. "In the end, there were very few customers with over 500,000 euro in savings left, so we decided to cancel the penalty rate." It remains to be seen how customers’ cash flows will develop in the future.

Many lenders have to pay for money they park at central banks. The European Central Bank has a deposit rate of minus 0.4 percent, while the deposit rate at Swiss National Bank stands at minus 0.75 percent. While passing on those costs to corporate customers in the form of penalty interest is not unusual, such a step is still the exception for private customers in the region.

Original Story:
Deutsche, Schweizer Banken ändern Strategie bei Negativzinsen

--With assistance from Catherine Bosley and Carolynn Look.

Reporter on the original story: Stephan Kahl in New York at skahl@bloomberg.net

Editor responsible for the original story: Erhard Krasny at ekrasny@bloomberg.net

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