Early in July, Sweden’s Riksbank proved its dedication [5] to the post-crisis central bank mantra of “if it’s broken, break it some more” when, after becoming the first country to witness observable, indisputable evidence of QE’s failure, the central bank pushed rates further into negative territory and expanded QE.
The problem for Sweden, as we documented in “For The First Time Ever, QE Has Officially Failed [6]”, is that QE had soaked up so much of the available high quality collateral that bond yields and the krona were moving in the wrong direction (i.e. higher) meaning that more QE would only exacerbate the situation, leading to still higher yields and a stronger currency. Incidentally, to avoid distorting the market even further, Morgan Stanley thinks the Riksbank may have to resort to mortgage bonds in the not-so-distant future.
Of course as we’ve seen, things can always get NIRP-er-er in the new paranormal which is why the market is pricing in a 50% chance of more easing from the Riksbank at tomorrow’s meeting.
The problem is that if you go NIRP and still are not able to achieve the kind of economic outcomes you were looking for by essentially forcing depositors to choose between a tax on their savings and pulling money out and spending it, well then the next logical thing to do is to stop accepting deposits, which is apparently what it’s come to in Sweden. Here’s more from Radio Sweeden [7]:
Richard Landén from Helsingborg, southwest Sweden, tried to open a simple savings account at Swedbank. But the bank wanted him to move over his entire account, including his monthly salary deposits and any savings he had.
"You have to be an complete customer, they said. It's either that or nothing at all, apparently," Landén told Swedish Radio News.
Swedbank declined to comment on the case.
Sweden's central bank has cut its key interest rate, the repo rate, to -0.35 percent, meaning making a profit on savings alone has become nearly impossible. The central bank will announce its next interest rate decision on Thursday.
Exactly how many people have been denied opening a savings account is hard to say. But savings advisor Claes Hemberg at Avanza Bank thinks it's a new trend. Several customers have been in touch with him about it
"Yes, savers get in touch and ask: 'Can the bank refuse me?'" he said.
"I think it's pretty bad style. At the same time, I have been a customer there before five years ago and has been very well treated. In this case, it was quite the contrary. It was a strange attitude from the beginning, I think," says Landen.
According to Swedish law, barring any extenuating circumstances like suspected money laundering or large debts, banks are not allowed to deny anyone from opening an account.
But deny they apparently will, because "simple" (i.e. probably small) savings accounts are nothing but a cost center, money-losing hassle and because anyone looking to open such an account isn't likely to be an individual with vast economic resources (i.e. is likely to be middle income at best), and because those types of people have a far higher propensity to spend what's in their pocket (see chart below) shutting them out kills two birds with one humiliating denial stone by alleviating the bank of the aggravation of servicing their accounts and by refusing to allow people to save, thereby effectively forcing the issue in terms of M2 velocity.
[8]
So in other words Mr. Landén from Helsingborg, either give the bank enough of your business to matter or else go do your patriotic duty and spend whatever you had planned to save. The Riksbank will thank you for it.
