The Strategist

German bankers call on ECB to cancel negative interest rates

10/16/2018 - 15:21

German commercial banks have urged the leadership of the European Central Bank (ECB) to change their attitude to interest rates in the near future. "We can only ask the ECB to remove negative interest from the market as soon as possible," said Hans-Walter Peters, Chairman of the Federal Association of German Banks (BdB), at the annual meeting of the International Monetary Fund (IMF) in Bali.

A long period of negative interest "creates real problems," he pointed out further. According to the union’s head, European banks have to pay annually penalty interest totaling about 7.5 billion euro to the ECB, while the US Federal Reserve does not charge such payments, and in 2017 it even paid banks about 26 billion dollars. In 2018, the volume of such payments could reach $ 45 billion. European banks are losing in the similar situation, Peters said.

Recall, European banks still receive money from the ECB at zero percent, but at the same time they have to be careful not to create large cash reserves, which arise, in particular, due to customer deposits, said the Chairman of BdB. For the excess free funds that banks place in the ECB, they have to pay fines at the rate of 0.4 percent. In this case, more and more banks shift the ECB penalty interest on their clients.

When making decisions, the European Central Bank is not obliged to take into account the situation in high-indebted Italy, which has to pay much higher interest rates for new loans than Germany. "We must pursue an independent policy towards the Italian government," Peters called.