Frankfurt The dispute over negative interest rates on current and overnight money accounts is entering a new round – with a current verdict. Accordingly, the approach of the German financial institutions is inadmissible. According to information from the Handelsblatt, the Berlin Regional Court ruled that Sparda-Bank Berlin is no longer allowed to charge negative interest on current and overnight accounts.
The court believes that the calculation of a custody fee for current accounts is “incompatible with the fundamental principles of the legal regulation” (Az. 16 O 43/21). “The clause is therefore unreasonably disadvantageous for the consumer,” says the reasoning for the judgment. Negative interest rates on call money accounts also contradict the legal guidelines. The bank should therefore “pay back the custody fee at its own expense”.
The Federation of German Consumer Organizations (VZBV) had sued. VZBV board member Klaus Müller was delighted with the decision: “The judgment is the most far-reaching judgment to date on the subject of custody fees.” The court had declared the introduction of custody fees to be inadmissible and did not make this dependent on whether an account maintenance fee was also charged.
According to Müller, savers with low to medium incomes and assets are now also affected by negative interest rates. “With our lawsuits, we want to ensure legal certainty and have the admissibility of custody fees in the interests of all consumers as broadly clarified as possible.” If necessary, the VZBV will go to the Federal Court of Justice, the highest German civil court.
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Sparda-Bank Berlin, one of the larger cooperative banks, announced that it would appeal the decision. “The ruling of the Berlin Regional Court differs from previous rulings which basically allow custody fees,” she said on request. In addition, the bank adheres to the practice, which has been agreed with the financial supervisory authority Bafin since 2019, of expressly agreeing the custody fee with existing customers.
Lawsuits bring uncertainty to the financial industry
The Sparda-Bank has been charging a custody fee for new checking accounts for over a year. It is 0.5 percent per year with an allowance of 25,000 euros. In the case of new overnight money accounts, the negative interest rate applies to deposits above 50,000 euros – a practice that is now widespread in the banking industry.
For the German banks and savings banks, the judgment means uncertainty. If negative interest rates on current and overnight money accounts ultimately turn out to be illegal, the industry is threatened with high repayments and damage to its reputation.
In the meantime, 413 financial institutions are calculating negative interest rates on overnight money and current accounts, as the comparison portal Verivox has determined with a view to the price notices. That is 130 percent more than at the end of 2020 and corresponds to a third of the banks and savings banks examined – most of which speak of “custody fees” themselves.
In fact, according to Verivox, the number is likely to be even higher because not all credit institutions publish the conditions freely accessible on the Internet. At least 150 credit institutions limit the exemption for the total deposit per customer to 50,000 euros or less. The industry cites the penalty interest rate as the reason for introducing negative interest rates, which it has to shell out from the European Central Bank (ECB) for short-term deposits.
The financial institutions – like Sparda-Bank Berlin – assume that they are allowed to charge custody fees for new current and overnight money accounts if this is published on a price notice or a list of prices and services. They make individual agreements on this with existing customers.
Dispute over legal definition of current account
The VZBV sees it differently. He is suing four other financial institutions, whose names are currently unknown. The consumer advocates believe that custody fees on current and overnight accounts are generally not allowed.
In their opinion, keeping deposits in the current account is not a special service for which a bank may charge an extra fee. Without deposit custody, the provision of payment services for the current account is not even possible.
In the case of overnight money accounts, the VZBV believes that the bank is the borrower and is obliged to pay interest. They are not allowed to demand a custody fee. The credit institutions, on the other hand, generally regard current accounts as a “mixed type contract”, for which, in their opinion, they can also charge a custody fee. Accordingly, money houses are likely to charge both a fee and an extra custody fee for the current account. The argumentation is similar for overnight money accounts.
A similar case from Saxony could also land before the Federal Court of Justice. Four months ago, the Leipzig Regional Court ruled in favor of the Sparkasse Vogtland. The court considers a custody fee for new current accounts to be permissible (Az. 5 O 640/20). Among other things, it referred to the entrepreneurial aspect: Although the savings banks are oriented towards the common good, they have to “align themselves to market conditions and act economically on the other hand”.
The consumer center Saxony had sued. She has meanwhile appealed to the Dresden Higher Regional Court (Az. 8 U 1389/21).
Criticism of the banks’ arguments
In 2014, the ECB introduced negative interest rates for short-term deposits from commercial banks. The penalty interest rate has been 0.5 percent since autumn 2019. It applies above a certain allowance, which relieves banks to a certain extent. In addition, credit institutions can also borrow money from the ECB at negative interest rates, which partially offsets the effects.
This is another reason why the VZBV is attacking the financial sector. “Many banks argue that the ECB’s negative interest rate policy would almost force them to pass the costs on to customers. But that’s only half the story, ”criticizes VZBV boss Müller. The ECB allows “generous allowances” for funds parked there. The financial sector sees the penalty interest rate and bond purchases by the ECB, however, as a great burden on their business.
More: DKB calculates negative interest from 25,000 euros