Danske's Richest Clients Are Given a Guarantee on Negative Rates

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Danske's Richest Clients Are Given a Guarantee on Negative Rates(Bloomberg) -- Danske Bank A/S says it won’t ask its wealthy clients to absorb the cost of negative interest rates despite moves by other European banks to do so.Christian Baltzer, the chief financial officer of Copenhagen-based Danske, characterized the idea of passing on negative rates to private customers as a dangerous step that would pose a risk to society. His comments come as some of Europe’s biggest banks are opting to charge rich clients for holding excess cash in their deposit accounts, in an effort to spread the pain of negative interest rates.Danske has “no plans to introduce negative interest rates on personal savings or current accounts,” Baltzer told Bloomberg.The biggest bank in Denmark, where interest rates have been below zero since 2012, acknowledges operating conditions are difficult for the financial industry. But charging private customers to hold their deposits would create new risks, including eroding progress made toward developing a cashless society, Baltzer said.“Doing so could have a negative impact at the societal level, including the risk of customers withdrawing more deposits in cash,” he said.Danske is refusing to take a step that others have deemed unavoidable. UBS Group AG plans to charge its Swiss clients an annual fee of 0.6% on deposits of more than 500,000 euros ($560,000). In Denmark, some smaller banks have hinted they are very close to having to pass on the cost of negative rates to retail depositors, while the country’s bankers association has asked the central bank to step in with measures to mitigate the pain.Sub-zero rates are becoming almost ubiquitous in the Nordic country. Denmark’s government debt is trading at negative yields across all maturities, with the yield on the 10-year note sinking to minus 0.6% late on Tuesday.Record Negative Rates Force Danish Banks to Ask for ReliefA subject that most banks once treated as taboo is now being openly discussed as the prospect of even lower interest rates looms large. Most analysts expect the European Central Bank to cut its deposit rate by 10 basis points to minus 0.5% next month. Denmark pegs its krone to the euro and has set its main rate at minus 0.65%.Banks have already passed negative rates on to their corporate clients, but Danske says the risks of doing the same with retail customers are too great for the bank to consider doing so.\--With assistance from Christian Wienberg.To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.netTo contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.netFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

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