Negative rates for small savers in Germany - how long before it gets to Ireland?


Frequent Poster
A co-operative bank has become the first German lender to pass on the cost of negative interest rates to new retail customers with small deposits, in the latest sign of how the European Central Bank’s policy is upending the country’s banking sector.

Volksbank Fürstenfeldbruck, which is located 30km west of Munich and has just €1.8bn in assets, said that it will collect a “depositary charge” of -0.5 per cent on instant access savings accounts with deposits of €1 and above.
In the FT.

How long before this happens in Ireland?
Generally negative rates have, thus far, only being applied to business deposits and in some cases, in other countries, to very large personal deposits.

It's a big step for a bank to charge negative rates on small personal deposits that will anger a lot of people.

The next step in the evolution of negative rates, in Ireland, is probably some bank applying negative rates to very large personal deposits, perhaps over 1 million like has occurred in other countries.


Frequent Poster
I agree.

Even if the negative rates are small (eg -0.1pc) it seems to make a huge psychological difference in the minds of ordinary punters (with smaller amounts) as they see themselves as being “robbed”. They may see the “under the bed” option as being more attractive. So the banks may see (collectively) a lot of outflows which from a liquidity viewpoint they may not want to happen.

This all assumes that the banks IT systems are able to cope with negative rates. (Brave assumption).

Alternatively they could just jack up all their charges to cover any collective negative interest cost!


Frequent Poster
I see that many CU are putting limits on shares/deposits.

In this context, aren't the State Savings rates becoming more attractive?

1.0% - 1.5% net is good in the context of 0% ECB rates, negative deposit rates, and CU limits.


Frequent Poster
I'm wondering if the Banking Levy will have any effect on Irish bank interest rates next year.

From my reading, 2019 is the base year for the last year of the levy in 2021 (assuming it's not extended). In 2021 it will charged at 170% x 2019 DIRT collections. So for a bank to offer a rate of 0.3% in 2019 costs an additional 0.18% (0.3% * DIRT @ 35% * 170%). In 2020 the additional cost will be gone, if the levy isn't extended. Will savers see any benefit in interest rates? I'm skeptical...