A German Bank Finally Caves: Will Charge Retail Investors A Negative 0.4% Deposit Rate

Tyler Durden's picture

On June 5, 2014 when the ECB officially announced that the rate on its deposit facility would go negative, we posted "NIRP Has Arrived: Europe Officially Enters The "Monetary Twilight Zone." However, while NIRP has already led to a dramatic upheaval across Europe's economies as a result of a perfectly "unexpected" surge in the savings (as we warned would happen last October, and as the WSJ "discovered" last week) one key aspect of this "zone" was missing for the past two years: banks charging negative rates to ordinary, retail depositors.

However, after a two year wait, this final piece of the NIRP puzzle was revealed when earlier this week, Raiffeisen Gmund am Tegernsee, a German cooperative savings bank in the Bavarian village of Gmund am Tegernsee, with a population 5,767, finally gave in to the ECB's monetary repression, and announced it’ll start charging retail customers to hold their cash.

Starting September, for savings in excess of €100,000 euros, the community’s Raiffeisen bank will charge a 0.4% rate. That represents the first direct pass through of the current level of the ECB’s negative deposit rate on to retail depositors.

“With our business clients there’s been a negative rate for quite some time, so why should it be any different for private individuals with big balances?,” Josef Paul, a board member of the bank, told Bloomberg by phone on Thursday.

The good news is that “as it looks today, charges on deposits won’t be extended to customers with lower amounts” than 100,000 euros. However, that may (and likely will) change at any moment.

Raiffeisen Gmund am Tegernsee may be a tiny bank that’s only introducing penalties to well-off customers, allegedly fewer than 140 will be affected, but in principle the ECB’s negative deposit rate was meant to encourage spending and investment in the euro area’s sluggish economy, not to tax thrifty Bavarians. A spokesman for the Frankfurt-based central bank declined to comment.

That, however, never happened, confirming once again just how clueless in gauging human behavior, and their "reaction function" (to use a trite central bank cliche) economists truly are.  Recall that as we reported in October of 2015, in the aftermath of NIRP "household savings rates have also risen. For Switzerland and Sweden this appears to have happened at the tail end of 2013. As the BIS have highlighted, ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain."

It took the economist brain trust at the WSJ about a year to also figure it out:

Policy makers in Europe and Japan have turned to negative rates for the same reason—to stimulate their lackluster economies. Yet the results have left some economists scratching their heads. Instead of opening their wallets, many consumers and businesses are squirreling away more money... Recent economic data show consumers are saving more in Germany and Japan, and in Denmark, Switzerland and Sweden, three non-eurozone countries with negative rates, savings are at their highest since 1995, the year the Organization for Economic Cooperation and Development started collecting data on those countries. Companies in Europe, the Middle East, Africa and Japan also are holding on to more cash.

To the WSJ's great surprise, central bankers have failed... again:

[T]here is a growing suspicion that part of problem may be negative rates themselves. Some economists and bankers contend that negative rates communicate fear over the growth outlook and the central bank’s ability to manage it.

NIRP "working" precisely in the opposite way of what was intended? Unpossible.

“People only borrow and spend more when they are confident about the future,” says Andrew Sheets, chief cross-asset strategist at Morgan Stanley. “But by going negative, into uncharted territory, the policy actually undermines confidence.” You mean to say that central banks buying $200 billion in global bonds a month is sending a signla that the world has never been in a greater crisis, and that NIRP tops it off by confirming consumer fears that things are only going from bad to worse? But... but... the S&P is at all time highs.

* * *

Meanwhile, now that a German banks has finally breached the retail depositor NIRP barrier, expect many more banks to follow. As Bloomberg writes, introducing the sub-zero policy in June 2014 with a cut to the deposit rate to minus 0.1 percent, ECB President Mario Draghi said the move was “for the banks, not for the people.” Should banks decide to transmit the reduction to savers then that’s their decision. “It’s not us,” he said.

It turns out the move was "for the people" after all, if only just 140 for now.

And since it is now common knowledge that NIRP is a total failure, the risk for ECB is that negative rates begin filtering through to the real economy while growth and investment is still sluggish, will "bring the downsides of the policy without the upsides" in Bloomberg's words. Euro-area growth slowed in the second quarter, data released Friday show, leaving it vulnerable to any fallout from the U.K.’s vote to leave the European Union. In that environment, lenders in Europe regularly complain, and the ECB has acknowledged, that negative rates depress their profitability. Some are already charging corporate clients with large deposits. The Bundesbank estimated last year that the low-rate environment would cut the pretax profit of German banks by 25 percent by 2019.

Even more ironic is that just two weeks ago, some of the "smartest" economists at the ECB predicted that what has just happened would never take place: in a July 28 speech, ECB board member Benoit Coeure said retail customers were staying with their banks because of signs they wouldn’t be charged for their savings any time soon. “Deposits of both households and non-financial corporations have been growing over the past two years, at a similar pace to the period before we entered negative interest-rate territory.” He concluded that “rates on retail deposits seem to have a zero lower bound.


So what happens next? Michael Kemmer, head of the Association of German Banks, said in a statement on Thursday that he doesn’t expect other banks to follow the example of Gmund am Tegernsee’s Raiffeisen. “It’s up to each bank whether and how to charge for deposits,” he said. “The competition between banks and saving banks in Germany is much too strong.”

Since depositors have no other option, we are confident that Mr. Kemmer will be dead wrong and in just a few weeks we will be reporting on the next, and next, and next European bank to charge its retail depositors negative rates.

The implications: the European savings rate will soar even higher, crushing Keynesian dreams of aggressive spending and sending the European economy into an even more acute defaltionary vortex, bond yields will tumble even lower, and gold will continue its steady move higher as it will have a real - at least in relation to cash - rate of return.

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ratava's picture

Does the bloomberg article really have an autoplay video with no controls? Fucking cancer.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) ratava Aug 13, 2016 10:11 AM

Usually there are controls at the bottom but I've seen them get lost depending on the sizing of the browser, its pretty crap and I hate their autoplay videos.  I usually turn the sound on my PC off if I'm on their site

GadExp's picture

Soooo....these banks get to borrow cash from their central bank and get PAID for it, and their response is to start charging their customers to hold cash in their accounts?


Yeah!  Like that makes sense!  


Obviously, there is a clause mandated by their central bank requiring them to charge their customers. 


This global economic system won't last 18 months before a complete collapse and unprecedented civil unrest.


Down with the banking cartel!!!

PT's picture

It's really simple -
Problem:  The plebs are too poor and can't afford to buy anything.
Solution:  Steal all their money and LEND it back to them.

When all you have is a hammer ...

oooBooo's picture

Banks make money by investing the deposits in some form. Loans or bonds or whatever. If the central bank is going to loan the bank for so very little money what does the bank need with depositors? When things go NIRP then the bank either charges depositors or just shuts down retail banking because it can get money cheaper elsewhere.


Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) ratava Aug 13, 2016 11:03 AM

Ghosterly is the solution.

de3de8's picture

Can you say unintended consequences due to intended consequences?

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Aug 13, 2016 10:10 AM

Excellent, the revolutions will begin when people see their bank accounts being drained out by Central Bankers.

Cognitive Dissonance's picture

Most will never make the connection to central banking. All they will see is their bank taking their money.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Cognitive Dissonance Aug 13, 2016 10:28 AM

My guess is that when its 1 bank they will say "damn greedy bankers" and move their money to the next bank.  When there are no options for positive or even zero yielding bank accounts people will begin to wonder how this can occur, eventually they will make their way to CBs or the heads of their government who will quickly point the finger at CBs as well to save their own skin.

nibiru's picture

That's the only way ordinary people will start learning household economics - "(...) there was money and now there is less of it. WTF Mr.Banker?"


Let's hope they will start connecting the dots between MSM telling them everything is ok - and things going south. This may be the spark of intelligence we so long awaited.

Folkvar's picture

I have no faith in people whatsoever. Things should never have got as far as they have and not just relating to financial issues either. The situation is this bad because the majority of people are as dumb as a brick. The Zionist MSM controls the minds of the masses effortlessly. In fact I'm sure they'll find a way to blame this on Brexit (as with everything else at the moment) and the people will buy it as usual. I'm fast becoming a misanthrope. When the proverbial hits the fan I believe I'm going to be very hard pressed to find any sympathy for those countless millions that will suffer because they're not blameless even though they'll claim to be. 


nibiru's picture

I get it totally. The only thing we should start our consideration from is - what to do next. Make money to be free to speak your mind vociferously and find a good internet connection on some South American island/coast.


We have so many bubbles now that we should educate ourselves to take advantage or at least store our wealth through turbulent times. Like La Nina this year and seeing RJA close to the 2009 bottom.


oooBooo's picture

Savers are the minority. Most people are consumers. They get money and they consume. They don't retain savings. This becomes another bank charge for them and a very small one at that. We live in a era where credit card cash back pays better than interest on bank accounts.

The goal is a one world company town with a hand to mouth rental economy. People own nothing. They rent and consume.The moment they don't work for the system, don't do what they are told, get out of line they get cut off from the system.

This is why savers are attacked. Why the media encourages people to hate savers. Savings is freedom. They don't call it fuck you money for no reason.

abyssinian's picture

Gold price will be above $1400 in few days

rbg81's picture

You think the Sheeple won't take this?  I think they will.  After all, most people these daze live from paycheck to paycheck (so not much to drain).  And besides....the Banks provide a SERVICE (even though they still charge 19% interest).  Ain't free money grand?  

cossack55's picture

Germans used to be real solid in "take it to the streets".  Not so much lately

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) cossack55 Aug 13, 2016 10:21 AM

People are a bit too scared now to gather in groups in fear that a Migrant might blow themselves up in the middle

abyssinian's picture

The bank robbery just begin! 

IridiumRebel's picture

My gold rests soundly at the bottom of Lake Gofuckyourself.

CheapBastard's picture

But...but...but CNN says gold doesn't yield anything!!!!



TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) CheapBastard Aug 13, 2016 10:26 AM

It doesn't its an inflation hedge.  The problem is we are heading to a deflation cliff.  If people panic and look to exit currencies completely then this will be great for gold, if people decide to sell overpriced assets (housing/stocks/farmland/etc) for currency then the path of gold is a bit more mixed.  If prices roll over then liquidations start because so many people are levered, that means that both bad and good assets can take price hits.

IridiumRebel's picture

Debt is better serviced with inflation.

oooBooo's picture

In a panic that drops the prices of real assets, so long as one has cash to play he can pick up bargins that will offset any temporary losses to PMs he may have.



Steroid's picture

But dear peasants do not forget:


Kirk2NCC1701's picture

Gold has had NIRP for decades.

Its components are:

   1. Buy and Sell Spreads (they milk you coming and going)

   2. Transport & Insurance costs

   3. Storage fees (monthly or annual)

Its fiat price trades like a Commodity, determined by 

     Demand + Speculation + Rigging

So much for being a RELIABLE "Store of Value". It's more accurate and honest to call it a "Reliable Store of Speculation".

That bit if Truthiness said (that many ZHers hate to admit), it makes perfect sense to allocate some percentage of your total assets to a mix of PM. I do. But, like any Asset Allocation exercise, you don't want your portfolio unbalanced or too speculative. That would be no different than gambling in a casino.

As much as some of you hate to actually admit it, you KNOW that I'm right, 'bitchez'.

oooBooo's picture

All those objections to PMs apply to stocks as well.

1) In stocks and other financial assets there are costs to buy and sell.

2) If you want your actual stock certificates there are various costs just like if you want your actual gold.

3) Storage costs are entirely optional or only if one has an enormous amount. Like stock certificates gold coins are small and easily stored. Many stock funds and investment firms charge a percentage of the portfolio value on an annual basis too.

4) Stocks are subject to demand, speculation, and rigging.

So yeah you're right, but it's true of just about anything these days. PMs are no worse than most things.


Caloot's picture

The powers didnt push cashless fast enough.    People will just pull the cash out.   This is going to start getting crazy, with a lot of unplanned consequences.   Should be real good for gold....just saying

Dragon HAwk's picture

Bank Withdraws in  3,2,1,........

Hulk's picture

0.4 % is a positive rate. Want to try that one  again ???

Anopheles's picture

They are charging 0.4%, not paying 0.4% on deposits. 

hooligan2009's picture

charging 0.4% is positive only for the bank... on the other hand.. it is a negative for the depositor - who should immedately convert to banknotes

bye bye german banks - just wait til they have to pay customers to take a mortgage - see if that model works

hooligan2009's picture

go long bank note printing company stocks and fireproof safe manufacturers...

congratulations Draghi you have brought about another Weimar republic dose of monetary collapse soon to be followed by hyperinflation

can nobody see this coming? i mean it is obvious to any sane human being rigt?

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) hooligan2009 Aug 13, 2016 11:05 AM

Jews cannot help themsleves. They are damned.

Anopheles's picture

At least there are 500 Euro notes.  At but only for the next year or two. 

Swamp Yankee's picture

To:  Our valued customers

From: Das Bank

Re: NIRP you!

   NIRP you!



  Das Bank.

Barnaby's picture

Fuck banks.

Das Mattress!

Allen_H's picture

I think/imagine this is a test run RIGHT? To see if the plebs will stick, hopefully not.

PT's picture

You can never eat just one peanut.

nakki's picture

Savings over €100,000 so move your money or open up however many accounts it takes to get to €99,999 or under.

EDIS doesn't cover anything above €100,000 anyways so why would anyone have more than that in a single account?

bornlastnight's picture

"Savings over €100,000 so move your money or open up however many accounts it takes to get to €99,999 or under."

According to the storyteller who wrote this article, he threw in a caveat:

"The good news is that “as it looks today, charges on deposits won’t be extended to customers with lower amounts” than 100,000 euros. However, that may (and likely will) change at any moment."


Disclaimer: Long on mattresses and pillow sheets...for the small timer, shoe boxes and Mason Jars.

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) Aug 13, 2016 10:50 AM

This is VERY bullish for stawks!

Seasmoke's picture

How do you say, And Its All Gone, in German ???