Commerzbank, Germany’s second-largest bank, a toppling marvel of ingenuity during the Financial Crisis that was bailed out by ever dutiful if unenthusiastic taxpayers, will now reward these very folks with what Germans have come to look forward to: the Wrath of Draghi.
It started with Deutsche Skatbank, a division of VR-Bank Altenburger Land. The small bank was the trial balloon in imposing the Wrath of Draghi on savers and businesses. Effective November 1, those with over 500,000 on deposit earn a ‘negative interest rate’ of 0.25%. In less euphemistic terms, they get to pay 0.25% per year on those deposits for the privilege of giving their money to the bank.
‘Punishment interest’ is what Germans call this with Teutonic precision.
The ECB came up with it. In June, it started charging a ‘negative interest rate’ of 0.1% on reserves. In September, it doubled that rate to 0.2%.
‘There will be no direct impact on your savings,’ the ECB announced at the time. ‘Only banks that deposit money in certain accounts at the ECB have to pay.’ It even asked rhetorically: ‘But why punish savers and reward borrowers?’ And it added helpfully: ‘This behavior is not specific to the ECB; it applies to all central banks’ [here’s part one of the saga… The Wrath of Draghi: First German Bank Hits Savers with ‘Negative Interest Rates’].
On November 6, as rumors were swirling that even the largest banks would inflict punishment interest on their customers, Commerzbank CFO Stephan Engels came out swinging in an interview to assuage these fears. He said point blank, ‘We cannot imagine negative interest rates on deposits of our individual and business customers.’
On November 11, it was Martin Zielke, member of the Commerzbank’s Board of Managing Directors, who recited the same corporate script in his interview with Focus: ‘We cannot imagine at the moment that private customers pay a negative interest rate on their deposits with us.’
This post was published at Wolf Street by Wolf Richter ‘ November 20, 2014.
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