Before the ECB’s interest rate decision: Many banks are lifting negative interest rates

As of 07/15/2022 09:12

The era of negative interest rates is ending. There is a growing number of banks that completely or partially eliminate the so-called trust fee for individual clients. Is it worth saving now?

Fewer and fewer banks charge negative interest. Even before the expected first major interest rate hike in eleven years in the euro area, at least 49 financial institutions completely or partially abolished the so-called escrow fee for private clients. This is due to the evaluation of the Verivox comparison portal about 1,300 banks and savings banks.

However, many banks are still waiting. According to the data, at least 426 credit institutions still charge negative interest over certain amounts of funds on a call or current account (as of July 14). “As soon as the central bank abolishes penalty interest rates on bank deposits, negative interest rates for savers will also disappear,” expects Oliver Maier, Managing Director of Verivox Finanzvergleich GmbH. “The historical phenomenon of interest rates is ending.”

The ECB tightens its monetary policy

The background is expected monetary tightening by the European Central Bank (ECB) next Thursday (21 July). In view of the record inflation, the ECB wants to raise the key interest rates in the euro zone by 0.25 percentage points. In September, the central bank had the prospect of another, perhaps larger, rate hike. Banks still have to pay 0.5 percent. interest if they park their funds at the ECB. Many financial institutions pass the costs on to their customers.

Several large institutions, including Deutsche Bank, have already announced that, in line with the ECB’s decisions, they will lower negative interest rates for their clients. According to Verivox, many banks and savings banks automatically lower their negative interest rates anyway in the event of an interest rate correction, as they clearly linked the deposit fee to the ECB’s deposit rate.

Detailed results

According to the assessment, since the end of April, 34 financial institutions have removed their negative interest rates completely. Discounts have been significantly increased in another 15 institutions, so that at least most customers no longer have to pay negative interest. Another institute decided to abolish it completely, and from August 1, the negative interest rates will no longer apply.

In addition to online banks, there are many regional institutions among the financial institutions that have initiated the change, including several Sparda and PSD banks, as well as Volksbanks and savings banks.

Is it worth saving again?

The predictable end of negative interest rates is good news for bank customers. Due to the change in ECB interest rates, savers can also count on an increase in interest rates for term deposits and the like. “If interest rates increase in the future, the savings business will become attractive for banks again. The first institutes are already positioning themselves for this, ”explained Maier.

But high inflation is now chewing on savings, eating up interest income. Because the so-called real interest rate – what is left of the interest rate after adjusting for inflation – is clearly in the negative range. To generate real returns, the interest rate would need to be higher than the inflation rate, otherwise the money invested will continue to depreciate.

Throughout 2022, the Deutsche Bundesbank expects an inflation rate of 7.1 percent. in the largest economy in Europe. According to the forecast updated yesterday, the European Commission currently forecasts inflation at the level of 7.6% this year. in the euro area, and even 7.9 percent. in Germany.

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