The five-year low and negative interest rate policy pursued by the European Central Bank (ECB) is worrying banks in the euro area, who expect a further imminent decline in the rent of money.
How does this strategy affect banks, their clients and savers?
- What impact for the banks? -
Every six weeks, the ECB decides for the 19 countries of the euro area the level of "leading" interest rates, which affect the cost of bank credit as well as the return on savings.
Since March 2016, the banks have been refinancing for one week at the ECB at a rate of 0%, but they are being deducted at the rate of 0.40% for "excess" liquidity, which exceeds a mandatory minimum amount and is placed in the bank. central to fail to place them in the economy.
In this way, the ECB seeks to encourage these institutions to lend to stimulate activity.
In early September, this liquidity amounted to nearly 1,800 billion euros, according to the ECB, as a result of debt buybacks made by the monetary institute for 2,600 billion euros between 2015 and the end of 2018 to support the economy.
By applying to this mountain of dormant money a negative rate of 0.40%, the annual bill amounts to 7.1 billion euros for banks, calculated AFP.
French and German banks pay the highest price, according to an analysis by ING bank. Deutsche Bank has calculated it to "2 billion euros over 4 years," according to his boss Christian Sewing, whose establishment is one of the least profitable in the euro zone.
"In the long run, these low rates ruin the financial system," said the banker.
- What perspectives? -
Since late July, the horizon is clouding for the European banking sector, which anticipates a further decline in rates decided on Thursday.
Banks, whose securities are heckled on the stock market, must convince investors of their commercial capacity to deal with sustainable negative rates, while respecting the regulations that requires them to acquire additional capital to deal with any shocks financial.
However, the banking system is not uniformly exposed to low interest rates: banking groups whose revenues depend mainly on lending and deposit activity, such as the German regional banks, suffer more from this environment than diversified banks in the banking sector. financial services, insurance or investment and investment banking, like French institutions.
- What consequences for customers and savers? -
"The negative rates lead to the absurd situation where banks no longer want to have deposits from their customers," said early September Sergio Ermotti, head of the Swiss bank UBS.
Until now, only business customers could be billed for large deposits with a bank, but according to a survey conducted in Germany in July, about thirty banks in the country have decided to tap their wealthiest clients whose deposits reach at least 100,000 euros.
Nevertheless, this practice is still rare in the euro zone, where there is fierce competition between banks, which has to conquer more customers to compensate for their loss of margin.
The competitive rate mortgage has thus become their main bait, benefiting the new borrowers who appear as the big winners of the ECB's strategy.
On the other hand, savers are seeing the performance of many savings products dwindle. A sensitive subject for those who want to build retirement savings, as in Germany.
It then becomes tempting for individuals or investment funds to take "excessive risk," says economist Eric Dor, which could feed bubbles likely to trigger future crises.
© 2019 AFP