Negative-Rate Dispute in Denmark Spreads to Corporate Clients

Denmark’s minister in charge of financial legislation says he thinks it’s time for the government to discuss whether it’s fair for banks to impose negative deposit rates on small businesses.

Roughly a month after attacking the industry for passing subzero rates on to average households, Business Minister Simon Kollerup said it’s worth having a similar debate around some corporate rates.

Negative-Rate Dispute in Denmark Spreads to Corporate Clients

“I’m seeing many -- especially smaller -- companies approaching me, either directly or through their organizations, who think there’s a problem” with negative bank rates, he said on Tuesday. “We must be open to having that discussion.”

Denmark has had negative rates since 2012, which is longer than any other country. After about three years of the policy, banks found the cost of the regime too burdensome to bear alone, and started passing it on to their corporate clients. In 2019, banks began imposing subzero rates on private customers’ deposit accounts. In the meantime, more than a third of Danish banks’ retail deposits carry a negative rate, a world record.

Kollerup says banks have gone too far. “It’s a matter of fairness. I don’t think it’s fair that regular Danes, retirees, have to pay negative interest rates.”

Denmark’s financial industry says banks have little choice, after living with negative rates for nearly a decade. Even the central bank has weighed in to urge the government to avoid intervening in what it characterizes as a market mechanism.

But Kollerup says he wants a review of the entire setup, and has characterized the financial industry as “greedy” as part of a war of words that’s grown increasingly tense.

Earlier this year, Denmark’s biggest banks lowered the threshold for when they will force retail clients to accept negative rates, setting the level at 100,000 kroner ($16,000), less than half the previous cut-off point.

“If banks go further down than that, there will need to be a discussion around the political response,” Kollerup said. The risk, according to the minister, is that consumers and even small companies will start putting their money elsewhere, he said.

“If Danes are being pressured to withdraw their money from the bank, sew it into the mattress or invest it in shares, even though they might not have the risk appetite, I fear that the entire trust in our financial sector and the payment infrastructure is at risk,” Kollerup said.

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