Tiny German Bank Challenges Norm by Charging Wealthy Clients for Deposits, Reports Reuters

By Alexander Hübner

FRANKFURT (Reuters) – A small cooperative bank located in the Bavarian Alps is challenging a longstanding German practice by imposing charges on wealthy clients for depositing their funds in light of the European Central Bank’s transition to negative interest rates.

Raiffeisenbank Gmund, situated by the picturesque Tegernsee lake—known for its affluent residents including actors and sports figures—will introduce a custody fee of 0.4 percent on sight deposit accounts exceeding 100,000 euros (approximately $111,500) starting in September, according to a board member’s statement to Reuters. These accounts afford depositors the flexibility to withdraw their money anytime.

While several German banks have passed on the ECB’s negative deposit rate to larger commercial clients like corporations and institutional investors, extending such charges to retail customers has traditionally been viewed as too drastic.

“We have communicated with all major depositors, urging them to reconsider their options. Without an incentive for change, there will be no change,” said board member Josef Paul.

The cooperative direct bank Skatbank has implemented negative rates on deposits over 500,000 euros since 2014. Meanwhile, GLS bank, an ecological lender and part of the cooperative network, has been asking its customers for a “solidarity contribution” to mitigate the effects of negative interest rates.

The ECB has adopted a negative deposit rate to stimulate lending by banks as a means to invigorate Europe’s economy, still grappling with the repercussions of the financial crisis. In turn, banks are incentivizing depositors to consider reallocating their cash away from deposit accounts into various financial products.

Germany’s cooperative banking association BVR stated it does not anticipate a widespread adoption of negative rates among other banks in its network following Raiffeisenbank Gmund’s example.

“We do not foresee retail banking embracing negative rates broadly in Germany, primarily due to the fierce competition in the German banking sector,” the BVR noted.

In Gmund, most customers remain unaffected by the new fee. The cooperative bank has contacted fewer than 140 clients, who collectively hold 40 million euros in deposits, regarding the impending charge, which has already had a tangible impact.

“Some clients have opted for alternative investments, and others have transferred their funds to different banks,” Paul remarked, clarifying that there are no plans to extend charges to less affluent customers.

Raiffeisenbank Gmund is relatively small within the cooperative banking landscape, operating six branches and possessing total assets of approximately 145 million euros. It faces a significant imbalance of deposits, only managing to recycle a portion as loans.

The Bavarian GVB cooperative banking association, which comprises 269 member banks, has expressed support for Gmund’s stance.

“The ECB’s aggressive monetary policy is imposing substantial costs on all banks,” a GVB spokesperson stated. “As a last resort, banks may have to explore ways to recover the costs associated with deposits,” he added.