Berlin – Where to go with the money? Not only savers, but also the banks are asking this question. Because they have to pay 0.4 percent penalty if they park money with the European Central Bank (ECB). Finance houses are playing through a variety of scenarios – up to the safekeeping of money in safes.
Why is the ECB charging penalties?
The monetary authorities want to boost lending in the euro area with a package of measures – including the penalty rate. If banks have to pay more for bunkering liquidity – that’s the theory – it makes them more likely to pass the money on as credit to consumers and businesses. This should push the economy and the extremely low inflation. In May, consumer prices in the common currency area had fallen by 0.1 per cent compared to the previous year. Permanently low or even falling prices are considered to be a cyclical risk because businesses and consumers could postpone investment in anticipation of falling prices. Critics, however, consider the impact of ECB monetary policy to be limited.
How can the institutions escape the penalty interest?
You could store the money yourself. According to media reports, Commerzbank is playing through options. There is currently no decision to hoard cash in vaults, says a Commerzbank spokesman. In the past, several Bavarian savings banks had already dealt with the question of whether storage in the vault was not cheaper. So far, however, the German Savings Banks and Giro Association (DSGV) is not aware that institutions have actually implemented these mind games. The CEO of Landesbank Hessen-Thüringen (Helaba), Herbert Hans Grüntker, emphasizes: “We are not dealing with this topic.”
What is the problem with safekeeping?
She is not free either. For the storage of cash in a larger style in case of doubt extra rooms should be rented. There are also costs for transporting the money and for higher insurance premiums. In the opinion of DSGV President Georg Fahrenschon the effort is not worthwhile with a negative deposit rate of 0.4 percent. For a large institute such as the German bank it is considering the volume no option to save money physically, says the chief economist of the bank, David Folkerts-Landau.
What possibilities do the financial institutions still have?
Some now pass on the penalty interest to business customers – ie companies, but also professional investors such as insurance companies and pension funds. For average private customers, the penalty rate is currently not an issue. However, according to the president of the Association of German Cooperative Banks (BVR), Uwe Fröhlich, financial institutions may be forced to turn to the price screw: “Everyone must think in his bank, how he works on conditions-shaping against the loss of earnings are no doubt there. “
How do business customers of banks react?
The world’s largest reinsurer, Munich Re, announced in the spring that it would deposit a double-digit million-euro cash amount in order to avoid the ECB’s negative interest rates passed on by banks. “We test it now,” said CEO Nikolaus von Bomhard. One would have to try out how independent money storage works and whether this would save costs. Gold has also been stored by Munich Re. Details do not call the company. The insurance company Talanx, however, holds little of the money in the vault instead of keeping against negative interest in the bank account. “Do you want to go to the vaults for their claims payments and get their money out?” Argues Talanx boss Herbert Haas.