Frankfurt The Berlin smartphone bank N26 refrains from negative interest rates in the future. The financial startup (fintech) announced on Wednesday. According to this, from July N26 “no longer calculates the custody fee of 0.5 percent on deposits over 50,000 euros”.
The fintech is thus reacting to the announcement by the European Central Bank (ECB) that it will raise interest rates this year. The smartphone bank has been closely monitoring developments over the past few weeks, including the potential impact of rising interest rates.
“In order to pass on the benefits of this as quickly as possible and to support our customers in the current times, especially with savings projects, we are waiving the custody fee at an early stage,” N26 explains the decision.
In view of the high inflation, the ECB heralded a change of course in monetary policy at the beginning of June and, after many years of ultra-loose monetary policy, announced that it would stop buying billions of bonds at the end of June. In addition, the key interest rates are to rise by a quarter of a percentage point as a first step. The decisive factor is currently the interest rate for commercial bank deposits at the central bank, which is minus 0.5 percent.
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ECB President Christine Lagarde announced another, even stronger interest rate hike for September if the inflation outlook does not improve by then. A rate hike of 0.5 percentage points in the fall is therefore relatively likely.
In November 2020, N26 introduced a custody fee of 0.5 percent on deposits of EUR 50,000 or more for new customers. Both private and business customers with a paid premium account (“You” or “Metal”) were excluded.
Banks are still hesitant to abolish negative interest rates
N26 did not want to say how many customers recently had to pay negative interest and how many will be affected in the future. According to the smartphone bank, it has over seven million customers in 24 countries. In the course of the last round of financing last October, the Berliners achieved a valuation of a good nine billion dollars. This currently corresponds to around 8.5 billion euros, eight months ago it was 7.8 billion euros.
Previously, only a few banks had abolished negative interest rates for their customers in anticipation of the ECB interest rate hikes. ING Germany was the first large private customer bank to announce such a measure in mid-May. The direct bank raised the allowances on July 1 for credit balances in current and overnight money accounts from the current 50,000 to 500,000 euros. In mid-June, Sparda-Bank West, a large cooperative private customer bank, followed suit with its giro and money market accounts.
However, numerous financial institutions will only move away from negative interest rates if the ECB’s penalty interest rate is abolished. For example, Deutsche Bank announced in mid-June that the amount of the custody fee is based on the ECB’s deposit rate.
More: ING is the first major retail bank to say goodbye to negative interest rates