Background: For a year, the ECB’s interest rate on banks applies

Frankfurt / Main – Penalty rates for deposits? Sounds absurd, but has been a reality for a year – for commercial banks, the money overnight at the European Central Bank (ECB) park. Even after the decision of June 5, 2014, experts had feared that savers would once again be the victims.

Image: Flying bills 

What is the interest rate?

To the interest on bank deposits at the ECB. These are usually credited to banks for excess money they park at the central bank. In the crisis, the monetary authorities lowered this interest initially to zero percent. Thus, the financial houses earned nothing more when they invest money with the ECB. In June 2014, the ECB broke new ground and lowered this interest into negative territory – initially at minus 0.1 per cent and later at minus 0.2 per cent. Thus, the ECB buzzes the banks on a penalty interest if they hoard money with her.

How did the ECB justify this step?

The central bank wanted banks to pass on the many cheap money that the ECB has made available to businesses and consumers so that it flows into investment and consumption. Both tend to postpone the sluggish economy and increase inflation.

Are the banks rolling off the penalty interest on their customers?

So far, only a few institutions have introduced penalty rates on deposits – and only for large sums. For example, the small German Skatbank caused a stir because it demands a minus interest rate of 0.25 percent for amounts on overnight money accounts of more than € 500,000. However, this is only due if the customer’s total deposits exceeds three million euros. At least some other banks did not rule out penalties for major customers.

Is that just the beginning?

An industry-wide phenomenon for normal savers, penalties probably will not. The savings banks appease in terms of penalty interest. Spokesman Alexander von Schmettow from the German Savings Banks and Giro Association emphasizes: “Negative interest rates are not an issue for savings banks, and the institutes are doing their utmost to avoid that.”

What are the banks doing with the excess money?

To circumvent the ECB “parking fee”, institutions may put excess funds into assets. Commerzbank Chief Economist Jörg Krämer sees penalties for this effect above all: “The zero-interest-rate regime has been cemented, and in the desperate search for interest rates, investors have bought shares and government bonds and pushed up prices.” The latter helped especially the finance ministers of indebted states. The effects of the punitive interest rates on lending and the economy are low.

Are the institutes now parking less money at the ECB?

Banks have reduced their overnight deposits with the ECB. According to recent data, the institutes are still parking a good 105 billion euros with the ECB. At the height of the financial crisis, when the mistrust of the banks among each other was great, it was more than 800 billion euros.

Do the companies get easier loans from the bank?

Yes. According to the latest ECB survey, companies in the eurozone are slightly more likely to withdraw money from the bank. After the financial institutions tightened their conditions from mid-2007 to early 2014, they have since relaxed again. This trend continued in the opening quarter of 2015. In historical comparison, the procurement standards are still strict, emphasizes the ECB.

Will more loans be granted?

Yes. According to Bundesbank data, banks’ loans to companies rose at the end of 2014 for the first time since the summer of 2011. At the beginning of 2015, lending had picked up again noticeably. From the point of view of the Bundesbank, mini-interest rates are an important pillar of rising demand for credit. According to estimates by Commerzbank economist Krämer, the increase in lending is mainly due to rising demand – and not due to the greater supply of banks that avoid ECB penalties: “The growing credit dynamic is mainly due to the end of the recession in the eurozone to do, “Kramer analyzes.

 

 

News Investing money abroad: what do interest rate portals do?

News Investing money abroad: what do interest rate portals do?

finanzen.de News always well informed

Thursday, 24.08.17 , written by Anja Schlicht More and more people are interested in investing their money abroad on a daily or fixed-term account. There, the banks often offer higher interest rates compared to German financial institutions. Interest rate portals like WeltSparen, Zinspilot and Savedo make it easier for those interested to benefit from the better conditions. But Stiftung Warentest urges 

Zinsportale erleichtern Zugang zu ausländischen Konten

Saving with daily or fixed-term money abroad is usually more attractive

Daily or fixed-term accounts with an acceptable interest rate are in short supply in Germany in the course of the low-interest phase. Some savers are therefore looking for new investment opportunities and let their eyes wander abroad . There, some financial institutions offer them attractive conditions. To use them, investors can turn to different interest rate portals on the Internet. More and more, especially older male savers seem to seize the opportunity.

For example, WeltSparen has gained almost 23,000 new customers in the past six months, says Nina Schultes, spokeswoman for the company. Competitors Savedo and Zinspilot also report steady customer growth. According to the managing director Björn Jüngerkes, Savedo adds new customers in the four-digit range every month, while Zinspilot adds a three-digit number of new investors every day, according to the head of Andreas Wiethölter.

Use foreign overnight money or fixed deposit: Interest portals facilitate access

Savers who want to invest their money abroad have different interest portals to choose from. These differ, among other things, in their variety of offers, in the account management and in the amount of minimum deposits . For example, WeltSparen is the largest provider. It currently offers more than 140 daily and fixed-term offers at 34 partner banks, “concludes Schultes. Each customer has an individual account with their chosen European partner bank.

By contrast, Zinspilot is banking on a central account that investors can use for all their savings products. Already “starting at one euro, investments are possible”, emphasizes Wiethölter. Behind the portal stands the company Deposit Solutions, which recently acquired Savedo. Both interest rate portals expand their product range for interested investors.

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Stiftung Warentest: Not all offers of the Zinsportale are recommendable

How good interest rate portals are, the Stiftung Warentest has tested this year. The focus was on the safety factor in particular. The deposit guarantee protects up to 100,000 euros per investor in the event of bankruptcy. But the consumer organization points out that “many national security systems are still under construction.” In an emergency, therefore, the respective country would have to step in to compensate investors.

However, the Stiftung Warentest doubts that states with weak economic power are in a position to replace savers’ losses in a timely manner . Accordingly, in the eyes of the tester, only those offers are recommended that come from countries to which credit rating agencies certify a secure or very secure economic power. Therefore, Stiftung Warentest advises, for example, on offers from Portuguese, Italian, Romanian and Czech banks.

Deposit insurance of the banks

The deposit protection system protects deposits on a daily or fixed-term deposit account of up to € 100,000 per bank and investor through the national guarantee system should a bank become insolvent within the European Union.

Interest portals defend themselves against criticism of Stiftung Warentest

Asked about the criticism, WeltSparen replied that Stiftung Warentest “does not question the compensation itself, but merely the punctuality of the repayment.” Every saver must therefore decide for himself whether he shares these concerns, Schultes said. Moreover, the consumer organization does not take into account the size of the safety pots of the different countries. Many have already reached the minimum height of 0.8 percent of secured deposits, which will be required from 2024 onwards. Savedo also points to the stable deposit guarantee systems in the investment countries.

Various measures to protect investors

In order to provide customers with the greatest possible security, the interest rate portals have introduced different mechanisms. Often, the maximum amount invested per bank is limited to the amount that is protected by the deposit guarantee. For example, Zinspilot only lists “investment offers from banks in EU countries that have at least one investment grade rating in the country – that is, a very good and satisfactory credit rating,” explains Wiethölter. In addition, the portal offers its customers rating indices, on the basis of which they decide where they want to invest their money.

At Savedo, among other things, the financial position, creditworthiness and equity base of the foreign bank are comprehensively reviewed in order to “minimize the risk of default,” says Jüngerkes. World Savings also points to the direct and indirect monetary policies of supranational institutions such as the European Central Bank and the European Commission, which help protect investors.

Foreign overnight and term money accounts continue to offer interest rates

The interest rate portals are convinced that investors will continue to benefit from interest rate advantages abroad in the future should the conditions in Germany improve again. On the one hand, it is already evident that interest rates within the European Union are considerably different. On the other hand, banks must keep their interest rates above the German level if they want to remain attractive to foreign investors.

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