Negative interest rates in Germany

[alyssa85]

The European Central Bank has long had negative interest rates of -0.5% charged to banks that keep their excess reserves at the central bank. The thinking is that this will discourage banks from holding excess reserves and they will instead lend the money out.

Unfortunately, not only are the banks continuing to hold excess reserves, they have now decided to charge their customers negative interest rates to make up the losses:

https://cointelegraph.com/news/german-bank-boosts-bitcoin-negative-interest-rates-hit-every-account

According to multiple local press outlets including the Süddeutsche Zeitung on Nov. 19, the Volksbank Raiffeisenbank Fürstenfeldbruck (VRF) in Northern Bavaria is now charging 0.5% negative interest rates on the smallest deposits.

“We had to do it,” the publication quoted the bank’s management as saying.

The reason, they said, was the cost of “parking” money at the European Central Bank (ECB).

In Germany, negative interest rates previously impacted only deposits above €100,000, which constituted an interest-free allowance. VRF’s move makes it the first lender in the country to target savings below that level.

“Recently, more clients have been coming to us from other banks where they’ve already used up their allowance,” the management continued.

If you were a customer in this situation why would you continue to hold money at a bank? Remember that inflation is positive in Germany, so a negative interest rate at the bank combined with inflation in the economy means your wealth gets eroded fast. Better to hold stocks, bonds, real estate or bitcoin.

[tonyvo2017]

If you were a customer in this situation why would you continue to hold money at a bank? Remember that inflation is positive in Germany, so a negative interest rate at the bank combined with inflation in the economy means your wealth gets eroded fast. Better to hold stocks, bonds, real estate or bitcoin.

because their country usually doesn't hold much cash because they realize the danger of this action. A bank is what keeps their assets safe and also helps the economy grow if you send money through the bank.
I agree that the investment will be good but you know, the German economy does not grow so so if you invest in stocks, companies cannot increase the value of the stock due to the economy. Slow down and in danger of recession. Therefore, bank deposit is still the first choice for those who do not have the knowledge to invest.

[alyssa85]

because their country usually doesn't hold much cash because they realize the danger of this action. A bank is what keeps their assets safe and also helps the economy grow if you send money through the bank.
I agree that the investment will be good but you know, the German economy does not grow so so if you invest in stocks, companies cannot increase the value of the stock due to the economy. Slow down and in danger of recession. Therefore, bank deposit is still the first choice for those who do not have the knowledge to invest.

They don't have to invest in stocks in Germany. They can invest all over the world, wherever they find a profitable opportunity.

Also, they can invest in real estate. The mind boggles at Germans continuing to rent in old age, while keeping their money in banks that charge negative interest rates. That's a recipe for getting poor.

And of course people can always invest in bitcoin. Though that needs a certain appetite for risk, and I guess those people who are keeping their money in banks despite negative interest rates are extremely risk averse.

[gentlemand]

I don't understand why they didn't rename it as a 'service fee'. Free banking isn't a thing at all in quite a few places.

I have a bit of money in the bank. It's not there for investment purposes. It's there to be spent. I'd shop around if one place implemented this but wouldn't bust a gut doing it.

[stompix]

I have a bit of money in the bank. It's not there for investment purposes.

I think that a lot of people can't shake the memories of huge inflation and interest rate when it was quite the investment to have your money in the bank, you could get 200% back in a year, and the inflation was just ...300%..lol

Anyhow, hardly news, 2017
German companies hit by negative interest rates

If you were a customer in this situation why would you continue to hold money at a bank? Remember that inflation is positive in Germany, so a negative interest rate at the bank combined with inflation in the economy means your wealth gets eroded fast.

Yeah, as fast as the snail mail. Inflation is around 1% in Germany, fast as in decades.
Bitcoin dropped 2.46% today...what should we call this, mach3 speed?

The mind boggles at Germans continuing to rent in old age, while keeping their money in banks that charge negative interest rates. That's a recipe for getting poor

Again it shows just how stupid those Germans are. I mean they should look at other European countries that have a  high rate of ownership like Romania, Latvia, and Hungary, I'm pretty sure the average german is envious as the wealth of Romanians, even Monaco is red with envy.
No wonder they've lost two WW and their country is poor as *
They even have a budged surplus, man!!!!

[HeRetiK]

Better to hold stocks, bonds, real estate or bitcoin.

Bonds are even worse than just keeping money in the bank right now. Bitcoin is... well, gotta love Bitcoin, but one also has to admit that it currently doesn't fit everyone's risk profile.

They don't have to invest in stocks in Germany. They can invest all over the world, wherever they find a profitable opportunity.

I think a lot of the general populace still sees stock investments as a form of gambling. Even when investing conservatively via index funds you still might wind up with your funds being held up in a negative position over a prolonged time when a bear market strikes. This is further aggrevated by everybody and their dog expecting the next bear market being just around the corner especially since the current global boom cycle is already lasting for an above-average timeframe.

Also, they can invest in real estate. The mind boggles at Germans continuing to rent in old age, while keeping their money in banks that charge negative interest rates. That's a recipe for getting poor.

Investing in real estate takes money. Like in most countries, real estate ownership has become pretty much non-achievable during the last 10 years. In most areas the cost of real estate has more than doubled during the last decade or so, with disposable income staying pretty much the same. Not a good recipe for increasing home ownership. Especially with the middle class being squeezed through all age groups. The young are fucked because they were born too late for fetching good real estate prices. The old are fucked because the pension system is failing them. I think most people do want to achieve home ownership. It just has become pretty much impossible for most.

[teosanru]

The European Central Bank has long had negative interest rates of -0.5% charged to banks that keep their excess reserves at the central bank. The thinking is that this will discourage banks from holding excess reserves and they will instead lend the money out.

Unfortunately, not only are the banks continuing to hold excess reserves, they have now decided to charge their customers negative interest rates to make up the losses:

https://cointelegraph.com/news/german-bank-boosts-bitcoin-negative-interest-rates-hit-every-account

According to multiple local press outlets including the Süddeutsche Zeitung on Nov. 19, the Volksbank Raiffeisenbank Fürstenfeldbruck (VRF) in Northern Bavaria is now charging 0.5% negative interest rates on the smallest deposits.

“We had to do it,” the publication quoted the bank’s management as saying.

The reason, they said, was the cost of “parking” money at the European Central Bank (ECB).

In Germany, negative interest rates previously impacted only deposits above €100,000, which constituted an interest-free allowance. VRF’s move makes it the first lender in the country to target savings below that level.

“Recently, more clients have been coming to us from other banks where they’ve already used up their allowance,” the management continued.

If you were a customer in this situation why would you continue to hold money at a bank? Remember that inflation is positive in Germany, so a negative interest rate at the bank combined with inflation in the economy means your wealth gets eroded fast. Better to hold stocks, bonds, real estate or bitcoin.

Inflation is actually like 1.5% and 2% less than Inflation rate is a Pretty normal interest rates which banks offer in every country. Yet negative interest rate is more like a temporary situation once people start to spend money instead of holding things would then get rectified as inflation would grow a bit due to increased economic growth and then banks would once again make positive interest rates.

[Theb]

I only see two reasons why, either they are doing this to prevent people for creating multiple bank accounts on their bank or force the existing ones to deposit more money to them. Either way they are risking losing their small depositors because of this method since they think they will grab more money because of this kind of strategy. Because their is a strong chance that a lot of people will lose interest to them especially if other banks don't have that negative interest rate.

[el kaka22]

I don't understand countries that insist on negative interests. The reasoning could be whatever they want, sure they can give you a solid reason if you push them and it may sound amazing when they say it but the reality is they are basically forcing you to spend your money.

There is no reason for anyone to force you to spend your money so the government could get a bit load off their shoulders by citizens investing their money into everything and building the country instead of keeping it on their books. I believe that high interest equals high inflation and that is not something we could handle right now in the world since high inflation is a problem in many countries. But, you can find a sweet spot of 1-2% interest rates that would not only allow people to save money but also be risk free.

[Vishnu.Reang]

Euro is a inflationary currency and there is no valid logic behind charging negative interest rates. Even in Japan (where the currency is deflationary), the interest rates are positive in most of the cases. This is a very stupid move from the European Central Bank and will result in the banks (and the HNW individuals) finding some other alternative to storing their money in the central bank.

[Broly46]

And the bloodily govt turn a blind eye on these open robbery from taking place, tell ya every bloody bank would pay for what they did to the bitcoin, negative interest is the bottom line we can accept, they’re just trying to test our patience, but many dumb❤️❤️❤️❤️ are too afraid to take action, and only Satoshi have the balls to start the fire since 2009, now I don’t see many people are up to the task too.

[d5000]

The novel aspect of the Furstenfeldbruck Bank is not that they're charging negative interest rates. That is already relatively commonplace in the Euro zone (like @stompix already wrote). But it seems to be one of the first examples where also small private clients are affected ("from the first Euro on") as most other banks only charged to businesses and wealthy customers with holdings from 100K upwards.

I believe that this could trigger a run into cryptocurrencies, but maybe not in Bitcoin but into stablecoins like Dai or BitUSD which pretty much are like a "bank account without bank" (only that fees are pretty high). Bitcoin needs to stabilize more first to be attractive for the masses, it's still too volatile, like the current "slow downtrend" shows us - 2%-5% losses at some days may not seem catastrophic crashes but already are more than the "negative interest rate".

I don't understand why they didn't rename it as a 'service fee'.

That's actually what most banks are doing. Bank accounts have become more expensive in the last years. Even some "online-only" direct banks with low costs are charging monthly fees now.

@Vishnu.Reang : European Central Bank's negative interest policy is mainly caused by the low inflation rate. The ECB wants an inflation of 2% but inflation was near 0% in 2015 and 2016. Since 2017 it's growing again but still lower than 2%. (I'm not making a statement here about if this policy is good or bad and if inflation should be actually lower; but it's their kind of reasoning.)

[Febo]

The European Central Bank has long had negative interest rates of -0.5% charged to banks that keep their excess reserves at the central bank. The thinking is that this will discourage banks from holding excess reserves and they will instead lend the money out.

Unfortunately, not only are the banks continuing to hold excess reserves, they have now decided to charge their customers negative interest rates to make up the losses:

To many bankers and economists this is totally normal. I dont know why.   Nothing will change before USA will also have negative interest rates. That should happen in 2021 or even next year.

[electronicash]

i remember Antonopolous was saying about why anyone would try to put their money on banks. You already entrusted your money to the bank, they hold you money and yet they are still asking for fees because they are holding your money.  i was then thinking, why did anyone ever asks them about it. its one of the question i might throw to an agent if i find myself talking to them.

[Murat]

It's quite alarming that day by day we are looking forward to the crisis, not only Germany but also many other countries are passing a huge monetary liquidity crisis, Although their banking system is getting developed, this type of problem will remain in the future because people will withdraw their money from bank for purchasing cryptocurrency, I think in this way, there is a chance of getting accepted crypto to the people around the world, so Holding cryptocurrency is more profitable than depositing money in the Bank, so why not they are buying crypto because of a security purpose, If there is a proper regulation then it would become the most used platform in the current world.

[mu_enrico]

These Keynesian economists have the "mantra" to always "peg" the interest rate 1-2% below the inflation rate. It is interesting to see if this situation could go deeper or would bounce back to positive numbers. Either way is not going to solve the economic problems in the long run.

I remember reading an article stated that they could apply this negative interest rate even if you are saving in the form of paper cash. In other words, it's a form of forced double taxation.

[sunsilk]

I'm having an idea on why lately there were banks in my country (not Germany) that announced the service fee they will start getting from withdrawals and deposits which was free before, maybe we're also affected.

Those options you have were the best IMO although bitcoin isn't doing well today, I think that I'm on a better choice. I don't have bonds though because I don't think that it suits my investing style.

[BitHodler]

It was to be expected. I am actually surprised it didn't happen sooner. I have seen various economists predict negative interest rates to hit major countries last year, but at least, it still happened.

The problem now is that we could very well see it spread out like a virus because not lowering interest rates means that you are losing money unnecessarily, which is something banks are not going to allow to happen.

[abhiseshakana]

According to the general view, a negative interest rate means a customer who keeps his money in a bank, instead of getting interest, the customer is required to pay. Financial institutions that put their money in the central bank also incur negative interest rates.

In Germany itself applies -0.5% negative interest rates. This step was taken to boost public consumption and encourage economic growth. Reluctance to spend money causes the economy to not move, it is expected that the implementation of negative interest rates will attract people to fund and spend it in the productive sector.

Germany has a choice, can choose between consumption by saving (saving) or investment and can encourage one of them while sacrificing the other. In my opinion, the German people will choose to invest in gold.

In accordance with one of the articles I read that With a population of about 82 million, of which 69 million are over 18 years old, the survey says that 38% of people or 26 million German adults own gold in the form of bars and coins, 61.5% or 45 million adult Germans have gold jewelry, while 14.5% or 10 million people have gold ETF (a kind of securities guaranteed by gold) or similar products such as Xetra gold and Euwax gold. (Source: https://www.zerohedge.com/news/2019-04-28/vast-gold-hoards-held-germanys-population).

Why is it that there are individuals who save their money in the bank, assuming that the bank is still the safest and cheapest place to save their money compared to the depreciation of money due to negative interest rates. Straying money at home is very dangerous and saving money in a safe deposit box is also expensive. In addition, saving money in a bank is identical to the ease of conducting transactions everywhere without the need to carry cash.

[Kyraishi]

I mean, that's one way of the government telling you to either lose money not doing anything or spend it on investments like the ones you've talked about in the OP.

This might be a way to encourage more commerce and businesses inside of Germany, from my understanding was that they where doing fairly well in regards to economic development, and that's one of the main reasons why you would decrease interest rates, so I'm a bit confused at the move.

To be fair, a lot of the people I know barely have anything in the bank - it's all tied up in their assets.