Danske’s Richest Clients Are Given a Guarantee on Negative Rates

0
9

(Bloomberg) — Danske Bank A/S says won’t ask its wealthy clients to absorb the of negative interest rates despite moves by other European banks to do so.

Christian Baltzer, the chief financial officer of Copenhagen-based Danske, characterized the idea of passing on negative rates to private customers as a dangerous step that would pose a risk to society. His comments come as some of ’s biggest banks are opting to charge rich clients for holding excess cash in their deposit accounts, in an effort to spread the pain of negative interest rates.

Danske has “no plans to introduce negative interest rates on personal savings or current accounts,” Baltzer told Bloomberg.

The biggest bank in Denmark, where interest rates have been below zero since 2012, acknowledges operating conditions are difficult for the financial industry. But charging private customers to hold their deposits would create new risks, including eroding progress made toward developing a cashless society, Baltzer said.

Article continues below Advertisement...

“Doing so could have a negative impact at the societal level, including the risk of customers withdrawing more deposits in cash,” he said.

Danske is refusing to take a step that others have deemed unavoidable. Group AG plans to charge its Swiss clients an annual fee of 0.6% on deposits of more than 500,000 euros ($560,000). In Denmark, some smaller banks have hinted they are very close to having to pass on the cost of negative rates to retail depositors, while the country’s bankers association has asked the central bank to step in with measures to mitigate the pain.

Sub-zero rates are becoming almost ubiquitous in the Nordic country. Denmark’s government debt is trading at negative yields across all maturities, with the yield on the 10-year note sinking to minus 0.6% late on Tuesday.

Record Negative Rates Force Danish Banks to Ask for Relief

A subject that most banks once treated as taboo is now being openly discussed as the prospect of even lower interest rates looms large. Most analysts expect the European Central Bank to cut its deposit rate by 10 basis points to minus 0.5% next month. Denmark pegs its krone to the euro and has set its main rate at minus 0.65%.

Banks have already passed negative rates on to their corporate clients, but Danske says the risks of doing the same with retail customers are too great for the bank to consider doing so.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, ) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the , it is one of the riskiest investment forms possible.

Source: Investing.com