German bank breaks taboo by charging rich clients for deposits

A view shows Raiffeisenbank Gmund at Lake Tegernsee, Germany. (Reuters)
Updated 12 August 2016
0

German bank breaks taboo by charging rich clients for deposits

FRANKFURT: A small cooperative bank in the Bavarian Alps is breaking a German taboo by charging wealthy clients to deposit their money following the European Central Bank’s shift to negative rates.
Raiffeisenbank Gmund on the idyllic Tegernsee lake, home of wealthy actors and sports stars, will apply a custody charge of 0.4 percent to sight deposit accounts over 100,000 euros ($111,500.00) from September, said a board member.
Such accounts allow depositors to withdraw their money at any time.
Several German banks have passed on the ECB’s negative deposit rate to large commercial customers such as companies and institutional investors, but applying the charge to retail customers has been seen as a step too far.
“We have written to all large depositors and recommended that they think things over. If you don’t create an incentive to change things then things don’t change,” Josef Paul said.
Cooperative direct bank Skatbank has applied negative rates on deposits over 500,000 euros since 2014, while ecological lender GLS bank, also part of the cooperative system, is asking customers for a “solidarity contribution” to help offset negative interest rates.

LAST RESORT

The ECB has resorted to a negative deposit rate to try to encourage banks to lend to stimulate Europe’s economy, which is still suffering from the after-effects of the financial crisis. Banks, meanwhile, are seeking to encourage depositors to shift their cash out deposit accounts into other financial products.
Germany’s cooperative banking association BVR said it did not expect other deposit takers in its network to follow Raiffeisenbank Gmund’s lead.
“We don’t believe retail banking will see widespread application of negative rates in Germany, not least because of the intense competitive situation in the German banking market,” the BVR said.
Even in Gmund, the lion’s share of customers are not affected. Paul’s cooperative bank wrote to less than 140 clients, who together hold 40 million euros in deposits, about the new charge, which has already proved effective.
“Some of the customers we informed have opted for alternative investments and others moved their money to other banks,” Paul said, adding that a widening of the charge to less wealthy customers is not planned.
Raiffeisenbank Gmund is one of the country’s smaller cooperative lenders, with six branches and total assets of just 145 million euros. It has a substantial overhang of deposits, only part of which it manages to recycle as loans.
Bavaria’s GVB cooperative banking association, with 269 member banks, backed Gmund’s position.
“The ECB’s extreme monetary policy is creating considerable costs for all banks,” a GVB spokesman said.
“As a last resort, they also have to look at a means to be reimbursed for the cost of deposits,” he said.


German industry groups warn US on tariffs before Trump-Juncker meeting

Updated 22 July 2018
0

German industry groups warn US on tariffs before Trump-Juncker meeting

  • Washington imposed tariffs on steel and aluminum imports from the EU, Canada and Mexico on June 1
  • Trump is threatening to extend them to EU cars and car parts

BERLIN: German industry groups warned on Sunday, before European Commission President Jean-Claude Juncker meets US President Donald Trump this week, that tariffs the United States has imposed or is threatening to introduce risk harming America itself.
Citing national security grounds, Washington imposed tariffs on steel and aluminum imports from the EU, Canada and Mexico on June 1 and Trump is threatening to extend them to EU cars and car parts. Juncker will discuss trade with Trump at a meeting on Wednesday.
“The tariffs under the guise of national security should be abolished,” Dieter Kempf, head of Germany’s BDI industry association said. Juncker should tell Trump that the United States would harm itself with tariffs on cars and car parts, he told Welt am Sonntag newspaper.
The German auto industry employed more than 118,000 people in the United States and 60 percent of what they produced was exported. “Europe should not let itself be blackmailed and should put in a confident appearance in the United States,” he added.
German Economy Minister Peter Altmaier told Deutschlandfunk radio on Sunday he hoped it was still possible to find a solution that was attractive to both sides. “For us, that means we stand by open markets and low tariffs,” he said
He said the possibility of US tariffs on EU cars was very serious and stressed that reductions in international tariffs in the last 40 years and the opening of markets had resulted in major benefits for citizens.
EU officials have tried to lower expectations about what Juncker can achieve, and played down suggestions that he will arrive in Washington with a novel plan to restore good relations.
Altmaier said it was difficult to estimate the impact of any US car tariffs on the German economy, but added: “Tariffs on aluminum and steel had a volume of just over six billion euros. In this case we would be talking about almost ten times that.”
He said he hoped job losses could be avoided but noted that trade between Europe and the United States made up around one third of total global trade.
“You can imagine that if we go down with a cold in the German-American or European-American relationship, many others around us will get pneumonia so it’s highly risky and that’s why we need to end this conflict as quickly as possible.”
Eric Schweitzer, president of the DIHK Chambers of Commerce, told Welt am Sonntag the German economy had for decades counted on open markets and a reliable global trading system but added: “Every day German companies feel the transatlantic rift getting wider.”