The first bank in the world to offer 10-year mortgages with negative interest is now planning to charge wealthy customers to save amid predictions sub-zero rates could be here for as long as eight years.
Jyske Bank A/S, which this month made history by offering 10-year loans with a rate of minus 0.5%, plans to levy negative rates on deposits held by its richest clients starting in December.
Chief executive officer Anders Dam says that after seven years of negative rates in Denmark, something had to give. “We had always thought that negative rates were a temporary thing,” he said in an interview published on the bank’s website. “It now appears that they’ll be more permanent. The expectation is that there could be negative rates for the coming eight years.”
Jyske depositors will have to pay for any amount above 7.5mn kroner ($1.1mn), the bank said yesterday. The policy was announced with second-quarter results that showed net interest income fell 7% from a year earlier.
Dam said interest on the portion of a deposit exceeding Jyske’s threshold could be negotiated with the bank, but if there was no agreement, it would be set at minus 0.6%.
Banks in Denmark have had to deal with negative rates for longer than their European competitors: The nation’s central bank cut its benchmark rate below zero in mid-2012. UBS Group AG and Credit Suisse Group AG have taken similar steps with their wealthiest depositors. Danske Bank A/S is holding out: Denmark’s biggest bank guaranteed clients that it won’t follow suit.
Other Nordic banks have balked at the idea of charging retail depositors. At Swedbank AB, Sweden’s biggest mortgage lender, spokeswoman Unni Jerndal says there are no plans to introduce negative rates for private clients. “Our floor is zero,” she said by phone yesterday. Until now, banks have resisted sharing the pain of plunging rates with retail customers for fear of losing business. That may be changing after the Danish Bankers’ Association said seven years of negative rates are hurting the industry.
The association said the central bank ought to look into expanding a facility that allows banks to park excess cash at a 0% rate. The so-called current-account facility currently limits such deposits to a little over 30bn kroner for the whole industry.
Ulrik Nodgaard, the association’s head, said Jyske’s decision to charge its wealthiest savers shouldn’t come as a surprise, but such measures alone wouldn’t relieve pressure on the industry. Or on customers, for that matter.
“The more Nationalbank protects banks against negative rates, everything else being equal, the pressure is less,” he said, referring to Denmark’s central bank. However, “it’s still relevant to look at the experience of national banks in other countries like Switzerland and Japan that have gone further.”
The central bank of AAA-rated Denmark uses monetary policy to defend the krone’s peg to the euro. Its main rate is currently minus 0.65%.

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