Interest rates have only known one direction since last summer: upwards. Savings are in demand again. But financial institutions do not pass on the increased interest rates 1:1.
Leading bank officials have defended themselves against accusations that they are hesitant to pass on the increased interest rates to savers. “In fact, we have protected most of our customers from negative interest rates for many years,” said the co-head of the cooperative DZ Bank, Cornelius Riese, on Monday at the “Frankfurt Euro Finance Summit”. After the “paradigm shift” of the rapid turnaround in interest rates, the banking sector “now also needs a certain adjustment phase until the system is in balance again”.
After years of zero and negative interest rates, the European Central Bank (ECB) initiated a turnaround in interest rates last summer. Since July 2022, the central bank has raised interest rates in the euro area eight times in a row in the fight against high inflation. The key interest rate at which commercial banks can get fresh money from the ECB is now 4.0 percent. For the next interest rate decision on July 27, the ECB held out the prospect of a further increase.
Many banks responded with interest rate offers for savings customers, but there are still financial institutions that deal with zero interest on the call money account. The Bundesbank recently found that banks are sometimes taking more time than in the past when passing on the ECB interest rate hikes to savers. Consumer advocates from several federal states recently called on savings banks to “accept deposits from consumers in the amount of the statutory deposit guarantee and to pay interest on them”.
“Very, very healthy competition”
Commerzbank CFO Bettina Orlopp said at the conference in Frankfurt on Monday that she currently sees “very, very healthy competition” for deposits in Germany. In view of the speed at which the turnaround in interest rates happened, “one must also be careful not to get overwhelmed now”. In view of the costs associated with interest rate increases and issues such as deposit insurance, “you have to do it intelligently so that you don’t produce a counter-crisis now,” said Orlopp.
The goal is attractive offers for customers, but at the same time “a healthy balance between attractive offers, competition, liquidity and profitability,” said Orlopp. “As a bank, we have to find the right path for all of our stakeholders.”
Source: Stern
