Eurozone banks have paid the European Central Bank 25 billion euros in negative interest charges since 2014, despite new tiered rate

  • German and French banks have shouldered the burden of the ECB’s (European Central Bank) negative interest rate policy, with the two countries paying nearly 60% of all charges last year.
  • In 2019, German banks paid €2.3 billion in charges while French Banks paid €1.8 billion
  • While the newly-introduced tiered negative interest rate is expected to provide some relief next year, it will mainly benefit Southern European banks
  • Deposit Solutions suggests banks use allowances granted by the ECB to mediate deposits to other institutions that have a demand in customer deposits

Davos, 21. January 2020.  Research by Hamburg-based FinTech Deposit Solutions shows Eurozone banks have paid the ECB €25 billion in charges since the introduction of negative interest rates in 2014. This includes €6.7 billion in charges last year.

This comes despite the ECB’s introduction of a new tiering system in October 2019, which seeks to ease the impact of negative rates by excluding deposits of six times the minimum reserve, which the ECB requires banks to hold on accounts with their national central banks, from the negative rate. The policy followed the ECB’s decision to lower the deposit facility rate to -0.5% from -0.4% in September 2019.

The research also shows that German and French banks have paid the majority of negative interest payments to the ECB: German banks contributed a third (33%) of the total payments last year, while French banks have paid a quarter (25%), meaning the two countries collectively paid nearly 60% of the total Eurozone negative charges in 2019.

Dr. Tim Sievers, CEO and Founder of Deposit Solutions comments:In the past year alone, German banks have paid over 2 billion euros to the European Central Bank. That corresponds to 12 per cent of their previous year’s profits. Without the negative interest rate policy, this money would have been available to the banks for valuable and necessary investments in their competitiveness.”

Southern European banks benefit most from tiered interest rate

With the introduction of the two-tier system, the ECB exempts a total of 770 billion euros of surplus liquidity from the negative interest rate. Without the exempt tier the new deposit rate of -0.5 per cent would have put an additional burden of 3.9 billion euros on the Eurozone banks annually.

“With the tiered interest rate, the ECB significantly relieves banks with moderate surplus liquidity within the exempt tier. Banks with high excess liquidity, on the other hand, are sanctioned even more by the lower interest rate. As a result, the relief is mainly felt by southern European banks. German and French institutions are still facing annual negative interest payments in the billions, says Dr. Tim Sievers.

In November 2019, German banks reported deposit surpluses totalling 640 billion euros. Six times their minimum reserve was equivalent to 224 billion euros, which was thus excluded from negative interest within the exempt tier, which equals 35 percent of their excess liquidity. Italian banks had accumulated deposit surpluses of 139 billion euros. Their allowance was 108 billion euros, which is 78 percent of their surpluses. In Spain, Portugal, Greece and Slovakia, the total allowances were even higher than the banks’ aggregated deposit surpluses.

The banks could use the allowances granted by the ECB much more effectively if the institutions mediated deposits to other banks that have a demand in customer deposits. Our Open Banking platform makes this possible” says Dr. Tim Sievers. “We can contribute to a more resilient and more integrated European financial system.

Interest rate cuts of 10 basis points would lead to EUR 1 billion in added charges

The research by Deposit Solutions shows how the negative interest rate burden would develop in the eurozone if the ECB cut or increased interest rates. According to this analysis, each interest rate cut of 10 basis points would lead to an additional burden of one billion euros for Eurozone banks, of which German banks would account for approximately EUR 330 million. Correspondingly, each increase of 10 basis points would relieve the Eurozone of one billion euros.


About the research: For the research publication “Negative Rates & Banking Profits, Vol. 2 – How the ECB’s two-tier system affects European banks”, Deposit Solutions has calculated the negative interest rate burden of banks in the euro zone and Switzerland as of November 30, 2019 on the basis of aggregated central bank data on excess liquidity and minimum reserves. For calculating of the overall burden, unchanged deposit surpluses were assumed for December 2019.

About Deposit Solutions:

Deposit Solutions is a globally recognized FinTech company and the Open Banking platform for deposits. Its proprietary Open Banking technology provides an infrastructure for the global USD 50 trillion deposit market that benefits banks and savers alike. Deposit Solutions is already connecting more than 100 banks from 18 countries and additionally operates proprietary B2C Points-of-Sale (ZINSPILOT and Savedo) that market selected deposit offers of its partners directly to savers. Founded in 2011 by Dr. Tim Sievers, the company is headquartered in Hamburg, has additional offices in Berlin, London, Zurich and New York and employs a team of over 300. Deposit Solutions is backed by leading tech investors, such as, Vitruvian Partners, Greycroft, FinLab, Kinnevik, Peter Thiel, Top Tier Capital Partners, Angel Investor Stefan Wiskemann as well as Deutsche Bank AG. For further information please visit:

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