European banks have paid over EUR 20 billion to the European Central Bank since the introduction of negative interest rates five years ago

  • Research reveals European banks have transferred EUR 21.4bn to the ECB since the launch of the negative interest rates
  • This burden is not shared equally across Europe with German, French and Dutch banks bearing almost 70% of Eurozone interest charges
  • Charges amount to over 4% of total eurozone banking profits
  • Banks who open their deposit businesses to third-party banks could be less adversely affected by ECB charges

Hamburg, 06 June 2019. – The European Central Bank’s (ECB) negative interest rate has wiped EUR 20 billion from Eurozone banks’ balance sheet since the policy was introduced almost five years ago, according to new research by Deposit Solutions – the open banking platform for savings deposits. In its research, Deposit Solutions quantifies the impact of negative interest rates on Eurozone banks, showing that banks paid EUR 7.5 billion on their surplus deposits in 2018 alone. This means that the ECB’s policy costs them EUR 21 million every day.

The research, which analyses ECB data*, also finds that the burden of negative interest rates is by no means being shared equally by banks across Europe. German, French and Dutch banks bear the brunt with 69% of eurozone charges. German banks have been most severely affected, paying 33% of charges, with French banks paying 24% and Dutch banks paying 12% (2016-2018). Meanwhile, southern European states have been less adversely affected, with Spain, Portugal and Italy paying just over 10% of total charges collectively.

These charges are also having a sizable impact on Eurozone banks’ total profitability. Last year, they were equivalent to a 4% decline in profits: In 2018, Eurozone banks paid total deposit charges of EUR 7.5bn compared to profits of EUR 176bn (pre-tax and pre-deposit charges). Among major Eurozone economies, German banks bore the heaviest burden, losing 9% of profits. Overall, negative interest rates had the greatest impact on banks in Finland (-14.1%) and Cyprus (-13.9%).

Vulnerable business models

With the charges eating into a sizable portion of total profits, banks should be looking for ways to soften the impact. While some business models – mainly in the whole sale banking sector – benefit from low or negative interest rates on the funding side, for others managing the burden is more challenging: “Banks that act like closed shops have few options open to them when it comes to cushioning the effects of negative interest rates on their earnings. While they can raise fees or try to get rid of customer deposits, both of these steps simply pass the burden on to the customer. Instead, banks should position themselves as platforms and offer their customers a choice of third-party savings deposit products while maintaining the existing client relationship,” says Dr. Tim Sievers, CEO and founder of Deposit Solutions. “If you make open banking a part of your business strategy, you can use third-party products to do more business with your existing customers and win new ones. For many banks, the prospect of reducing the negative interest burden at the same time is an additional bonus. Instead of placing money with the ECB at a cost they can pass on excess liquidity to other institutions in a customer- and balance-sheet-friendly way.”

Payments rise continuously year-on-year

Deposit Solutions’ analysis also shows that the negative interest burden on banks increases year-on-year. Annual interest payments by German banks have more than doubled over the past three years. In France, the Netherlands and Luxembourg, too, payments shot up year-on-year. The effects of spiralling charges on Spanish banks is particularly extreme: In 2016 they transferred about 125 million euros to the ECB, in 2018 it was already more than three times that amount with about 400 million euros.


Notes to Editor

* Data is drawn from the ECB, Deutsche Bundesbank, Swiss National Bank and the Swiss Federal Tax Administration

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 90 banks from 16 countries and additionally operates proprietary B2C Points-of-Sale (ZINSPILOT and Savedo) that market the 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, Apeiron Investment Group and Angel Investor Stefan Wiskemann. For further information please visit: