The largest German direct bank wants its customers to agree to be allowed to charge penalty interest from as little as 50,000 euros on the account. There are few ways out. Unruly ING customers are threatened with expulsion.
Nafter Postbank and Commerzbank, ING Germany will soon be demanding negative interest on account balances starting at 50,000 euros. From November on, existing and new customers will have to pay a 0.5 percent “custody fee”, as the largest German direct bank with nine million customers announced on Monday. So far, the ING, which grew up under the name Diba and high interest rates on overnight money, only raised this fee for deposits from 100,000 euros from new customers. ING did not even introduce account management fees until 2020.
But in view of the negative interest that ING itself has to pay for its deposits at the ECB, it now wants to charge “penalty interest” even more comprehensively from its existing customers. “So far we have been able to largely offset the costs that arise from falling interest margins and the negative deposit interest rate of the ECB with our existing product portfolio,” said ING Germany boss Nick Jue. “However, the deposits continue to rise, also because many competitors have already introduced a custody fee for private customers.”
In other words: ING is trying to stave off the influx of deposits. This defensive maneuver has to do with the fact that almost all German banks have more deposits than their customers ask for credit. So the commercial banks are swimming in money.
40 percent of customers are said to have accepted this without complaint
Since 2014, the European Central Bank (ECB) has charged commercial banks with penalty interest for money parked with them, and there is hardly any interest to be earned on the bond market either. A few months ago, however, the ECB significantly increased the tax-exempt amounts (“graduated interest”) of the commercial banks for their deposits, thereby relieving them of negative interest rates. It also helps commercial banks that qualify for their so-called LTRO program with long-term loans (LTRO) also at negative interest rates, i.e. with a kind of premium. Thanks to these LTRO loans, Deutsche Bank and Commerzbank, for example, achieved surprisingly high earnings in the private customer business in the first quarter of 2021.
Despite these reliefs from the ECB, more than 400 German banks are now passing the negative interest rates on to their customers. This year alone, more than 150 were added, including large institutions. Postbank, which belongs to Deutsche Bank, lowered the exemption limits for savings deposits to 50,000 euros for current accounts and 25,000 euros for overnight money accounts of new customers, as the FAZ reported at the beginning of June. Afterwards, many existing Postbank customers also reported that they had been asked to agree to negative interest rates.
So far, banks have often introduced custody fees by changing their general terms and conditions. According to the industry, 40 percent of customers are said to have accepted this without complaint. But a new BGH ruling requires active customer approval. That is why Commerzbank has taken several months and will only be introducing negative interest rates on deposits of EUR 50,000 and above only from August.
Monthly savings plans were exempt from purchase fees
ING Germany gives its customers even more time. The new allowances and negative interest apply to all new accounts opened from July 6th. For existing customers, the custody fee of 50,000 euros or more will only be due from the beginning of November, the institute said. Of the nine million existing customers, around 750,000, or around 8 percent, would currently be affected. You should be written to in the coming weeks and asked for your consent.
If they do not agree to the custody fees, customers with more than 50,000 euros in their account at ING may end up being terminated. Before that, however, the bank wants to offer a way out: The tax exemption applies to each account, so if you only have one checking account, you can still open a call money account and distribute the money between the accounts. As long as the balance per account is below EUR 50,000, ING does not charge negative interest.
But ING would prefer customers to invest more of their assets in securities. To increase the incentive, it has exempted 700 funds and index funds as well as all monthly savings plans from purchase fees since April. In addition, the direct bank has expanded its advice in the securities business. In the first quarter of 2021, the number of depots increased by 100,000 to 1.8 million, the ING also announced on Monday. However, stock indices such as Dax and Nasdaq are close to their record levels. The upswing on the stock market began during the financial crisis and has now lasted an unusually long twelve years. It therefore does not make sense for bank customers to invest all of their account balances in securities.