Frankfurt / AFP
The German central bank, or Bundesbank, is worried that private savers may soon face negative interest rates on their bank accounts, board member Andreas Dombret warned in an interview.
“The banks and savings banks I speak to want to do everything to avoid that,” Dombret told Der Spiegel news magazine in its online edition.
“But the longer the current interest rate environment lasts, the higher the possibility that they might pass on the negative rates” to customers, Dombret said.
“As the supervisory authority, we don’t tell the bankswhat to do. Every bank and savings bank must decide for itself.”
In a bid to push up chronically low inflation in the euro area, the European Central Bank slashed its main refi refinancing rate down to zero this month and lowered its deposit rate to minus 0.40 percent.
The Bundesbank has made no secret of its opposition to the ECB’s decision to bring its key rates down so low for such a long period.
Bundesbank president Jens Weidmann said he was not convinced by the ECB’s latest policy moves.
With low interest rates offering little incentive to savers and weighing on banks’ profitability, board member Dombret noted that “lots of banks have increased their fees to customers or are thinking about increasing them.”
This could be in the area of cash withdrawals, cheque card issue or other services, he said.
As savers look for alternative returns on their money, the Bundesbank board member suggested that low interest rates could eventually lead to the emergence of a real estate bubble.
“Real estate prices have risen sharply in metropolitan areas in recent years,” he said.
“That’s why I have more reservations than in previous years,” Dombret said, urging banks to “be very cautious and weigh up their real estate credit decisions very carefully.”
Due to its strength and former size, the Bundesbank is the most influential member of the European System of Central Banks (ESCB). Both the Deutsche Bundesbank and the European Central Bank (ECB) are located in Frankfurt, Germany.
Bundesbank was greatly respected for its control of inflation through the second half of the 20th century. This made the German Mark one of the most respected currencies, and the Bundesbank gained substantial indirect influence in many European countries.