ADVERTISEMENT

German Banks Call Low Rates Devastating As Some Start Charging

German Banks Call Low Rates Devastating As Some Start Charging

(Bloomberg) -- In the run-up to the European Central Bank’s policy decision on Thursday, its low or negative interest rates are drawing criticism from a group of 51 German regional lenders.

“We already have a devastating interest rate situation today, the end of which is unforeseeable,” Peter Schneider, who represents public-sector savings banks in the southern German state of Baden-Wuerttemberg, said on Wednesday. “If the ECB aggravates this course, that would hit not only the entire financial sector hard, but especially savers.”

Schneider raised doubts whether lenders can afford to pay negative interest rates on excess liquidity to the ECB for much longer, without passing on those additional costs to a broader range of customers.

According to a survey from German aggregator Tagesgeldvergleich.net released last week, at least 22 German financial institutions are currently charging certain retail customers for deposits. In most cases, negative interest of 0.40% is applied to amounts above a certain threshold, it said.

Schneider’s criticism echoed comments by Hans-Walter Peters, president of the Association of German Banks. “It’s unacceptable that the ECB is the only major central bank in the world not to have at least mitigated negative interest rates by granting an exemption threshold for excess liquidity,” he said in April.

Early on Thursday, traders are pricing in a 54% chance of a 10 basis point rate cut at today’s ECB meeting. This compares with an expectation of about 40% on Wednesday afternoon.

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

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

©2019 Bloomberg L.P.