Negative interest rates in Germany

[alyssa85]

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.

If you want to charge -0.5% of 100,000, that's 500 euros per annum. Which is a pretty large service fee. It looks smaller if you say it is a negative interest rate!

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[HeRetiK]

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.

If you want to charge -0.5% of 100,000, that's 500 euros per annum. Which is a pretty large service fee. It looks smaller if you say it is a negative interest rate!

No worries, banks don't shy away from that kind of service fee. They just usually hide them by splitting them up into monthly fixed costs as well as penny and diming you for every bit of service on top.

Take a look at this price sheet, for example:
https://www.raiffeisen.at/eBusiness/services/resources/media/1021497204966-NA-1279548085059316048-1-30-NA.pdf
(the numbers will differ depending on the branch, but the pricing structure is usually pretty much the same)

Including taxes and ignoring compound interest they already charge you more than 0.5% in service fees for storing investments fonds by chipping away 0.039% plus tax on a monthly basis.

Luckily there are banks that focus on investments and charge much much lower fees. But most people simply get screwed over by their banks on a regular basis, no matter if they stay in cash or stocks.

[binhvo1505]

 wow, this shows that Germany is really underdeveloped in terms of economy. In fact, negative interest rates have existed for a long time but they only appear in times when the economy is gradually going into crisis or trade war.
This is a worrying sign for Germany and commercial banks are forced to operate at full capacity for the country to develop again. We can expect the German currency to decline in the near future.

[YOSHIE]

Despite what was done by the German Bank, it could lead to pros and cons, especially among the German people themselves.

There are some developed countries and also the Central Bank still do the way like Germany, negative interest rates, for example, as we know now, namely Japan.

From the Bank itself must have strong reasons about this, this decision is effective for educating commercial banks, for this matter it is usually believed to be able to reduce their aggressive lending, this is a common reason issued by the central bank of each country.

Basar possibility in my opinion towards Germany, about the news now negative interest rates, this will lead to factors very enthusiastic in determining the currency for the German country itself.
I'm sure this will trigger monetary policy towards banks in Germany today.
I think this news is to save them, the German central bank from borrowing money.

[supercanada1]

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.

Maybe Because the customers are already paying the service fee and it from no angle, can be named that. Banks are Just trying to keep the excess Reserves while paying the negative interest with help of its customers. That is actually very clever of them. It would have been much better if people start investing in cryptocurrencies. This way, they will stay away from all such tricks. They are also the future currency.

[plast555]

I think that was the case in some Asian countries. This is all about inflation.
Even Japan has a negative inflation rate, ie, deflation.
For people living in such countries, it makes more sense to invest in cryptocurrencies and get 10% annual interest. You can make USDT stakes on many exchanges, including Binance, and can earn yearly interest income.

[adzino]

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.

You probably have little knowledge on how the economy of a country works. Always saving money in the bank will help people earn interest but it won't help the overall development of the country. Again, negative interest rate is a monetary policy which affects the commercial banks. The commercial banks stores their reserves in central bank. Once the negative interest rate has been applied, the commercial banks will have to start paying the central bank money in order to hold their reserves. Thus it becomes expensive for them to do that and that is why the commercial banks instead of holding the money starts to give the money to the people as a loan with a very low interest amount. Thus people get more money to spend on their lets say business which will help in overall development of the country.

[veleten]

this is not new , many european banks have been doing the same
I guess its the common Central bank's policy around the globe , so much for "independent" countries and their " independent" monetary policies
everything is dictated from above , with a few exceptions all european countries follow same rules
the banking percent may vary from country to country , but if Germany keeps it negative expect all of the europe to follow the trend and either set negative % or make it as low as possible
on one hand as an interpreneur I can only applaud , in ideal world this should facilitate loans and even lower the percent I would have to pay if I took money from a bank
but again , reality is different , you will be hit with the same interest from the bank despite them literally forced to loan away the money an not to sit on them
try walking into a bank and ask for a 20.000 euro zero interest loan to start a business and you will see

[Hallmader]

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.

There is no more reason for keeping money in the banks if this is the situation. I better keep my own money at home. The banks are becoming useless instruments in this way. They better be closing their offices and stop holding the money of people if what they can give in return is a negative interest. For large sums of money, it is better to keep them in real estate and Bitcoin. Stocks are also in danger if the economic situation is in disarray.

[Sithara007]

Negative interest rates are not a new phenomenon. More than a decade ago, Japan started this by charging a negative interest rate of -0.10% or -0.20% on certain types of bank deposits. But then, you can't compare the JPY with either the Euro or the United States Dollar. JPY has increased its exchange rate against the USD by almost 4x during the past four decades. On the other hand, the purchasing power of Euro goes down with every passing year and they don't have any excuse to charge negative interest rates.

[CarnagexD]

I only see two reasons why, either they are doing this to prevent people for creating multiple bank accounts on their bank

I cannot see this reason logical from having negative interest rates. It does not makes sense at all since having multiple bank accounts is the same as having one, rates are still the same.

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.

As they follow such monetary policies they had nothing to do but to have negative rates, It is also for their clients to be safe as central bank are facilitating and holding their commercial bank reserve. It's not new for European country. The main reason why the german central bank is doing this is for them not to enter debt in least way possible cause if they do their economic stance would be at large.

[stompix]

wow, this shows that Germany is really underdeveloped in terms of economy.

Oh, yeah, every time you come to bitcointalk you must come across something like this.
We've just learne that Germany is underdeveloped!!!
I have nothing to add to it...nothing, speechless!

This is a worrying sign for Germany and commercial banks are forced to operate at full capacity for the country to develop again.

You could run for chancellor! I have the perfect slogan!
"'Bring Germany out of the stone age, Again!"

We can expect the German currency to decline in the near future.

Yeah, I heard the Deutsche Mark is dropping every week like Venezuela's bolivar...
There are no more shops accepting the Deutsche mark anywhere!!! Run for the hills!

I think this news is to save them, the German central bank from borrowing money.

Germany doesn't need money, the debt is going down and year after year the government is having a budget surplus!

[alyssa85]

I think that was the case in some Asian countries. This is all about inflation.
Even Japan has a negative inflation rate, ie, deflation.
For people living in such countries, it makes more sense to invest in cryptocurrencies and get 10% annual interest. You can make USDT stakes on many exchanges, including Binance, and can earn yearly interest income.

The thing is, Japan really does have deflation, so the negative interest rate might be justified. If the deflation is bigger than the negative interest rate, the saver makes a profit.

Germany has positive inflation. The negative interest rate is because other countries in the eurozone like Greece and Italy have deflation.

That means German savers have twin evils of negative interest rates AND inflation. So they're taking losses.

[Xxmodded]

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.

Europe looks not good countries become interested with bitcoin as legal currency payment, we never find in Europe country want serious for adopting and discussing about bitcoin or altcoin, they never try to discuss with public about how to use bitcoin and altcoin as legal payment transaction, bitcoin only have good thing on  Asian country because many countries support using bitcoin as legal curerrency.

[Vishnu.Reang]

Europe looks not good countries become interested with bitcoin as legal currency payment, we never find in Europe country want serious for adopting and discussing about bitcoin or altcoin, they never try to discuss with public about how to use bitcoin and altcoin as legal payment transaction, bitcoin only have good thing on  Asian country because many countries support using bitcoin as legal curerrency.

Are you joking? Europe has some of the most Bitcoin friendly governments, including Switzerland and Germany. Their tax laws regarding to cryptocurrency is also very liberal, when compared to that in other countries such as South Korea, United States and China. On the other hand, Asian countries such as China and India have some of the most restrictive laws related to cryptocurrency.

[X-ray]

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.

There is no more reason for keeping money in the banks if this is the situation. I better keep my own money at home. The banks are becoming useless instruments in this way. They better be closing their offices and stop holding the money of people if what they can give in return is a negative interest. For large sums of money, it is better to keep them in real estate and Bitcoin. Stocks are also in danger if the economic situation is in disarray.

Well that goes for cryptos aswell in the economic recession. The only thing that will hold its value or instead increase its value is basic needs. all these tertiary instruments are the ones that will lose its value first. In my opinion negative interest is okay only if it's temporary and not too long more specifically not decreasing the amount of money I hold significantly. Investing into real estate also has some risk considering that it's actually a bubble that could pop out anytime soon. The real estate investment is definitely overrated and too expensive nowadays. I'd just prefer to buy some lands if that is the case.

[sunwearVN]

The same as Japan.
I cam up with a question.
How the bank will survive if less people put the money in the bank?

[Darooghe]

It shows that in the current system saving money in the bank doesn't increase your purchasing power, the life gets more expensive while the interest the banks give you is less or much less than that. in an inflationary system you lose around 2% or more of your purchasing power if you keep the money in your bank or under your bed. Rich people invest in bonds and stocks and they gain more than what the price of living increases, let's say they gain 5%, so overall they gain 2% each year. You need to invest unless you want to get poorer, and only the rich people do, because poor people don't have any money left to invest.

Now everyone could understand the power of Bitcoin. In a deflationary system you gain purchasing power just by saving because prices tend to go down, so just by keeping your bitcoin you gain, let's say 0.5% each year. This works for both the poor and the rich. If you want to make more than that, you will have to take a much bigger risk.

[alyssa85]

The same as Japan.
I cam up with a question.
How the bank will survive if less people put the money in the bank?

It can't survive.

That's why Moody's has downgraded German banks 3 days ago:

https://www.cnbc.com/2019/11/21/moodys-downgrades-outlook-for-german-banking-system-to-negative.html

Moody’s has downgraded its outlook for German banks to “negative” from “stable” as profitability and overall creditworthiness weaken in a low interest rate environment.

In a report published Thursday, the ratings giant said the already weak profitability of German banks will decline further over the next 12 to 18 months as net interest income falls.

There are going to be some spectacular bank failures in the next five years.

[alexsandria]

Maintenance as it is. If it were secured though why not stocking it, in such bank. Though talking money wise, everybody would literally be switching choices right away. And I as well, who would've like to get their money lower than it is. Besides, those wealthy enough people wouldn't care about such thing existing. Not worthy of their attention.