Negative interest rates on savings an unavoidable future: Report

Dutch consumers will start paying interest on their savings accounts in the near future, various analysts told Financieele Dagblad. They describe negative interest rates on savings as an unavoidable future.

The cash that Dutch banks keep and are required to deposit at the European Central Bank currently costs them more than half a billion euros per year, due to the negative deposit interest rate. "Dutch banks together have 138 billion euros in surplus liquidity, and they pay 0.4 percent on that", Elwin de Groot of Rabobank said to FD.

This amount will increase even further if the ECB further reduces this interest rate. The expectation is that the deposit interest rate will gradually be lowered to -0.7 percent in the summer of next year, with the first step taken later this week. 

The negative deposit interest rate already costs Dutch banks together 550 million euros per year. The deposit interest ABN Amro pays to EBN, for example, is 120 million euros per year. That is about 5 percent of the bank's annual profit. Dutch banks account for 8 percent of the 7.2 billion euros that ECB charges the banks in the eurozone per year. 

ING CEO Ralph Hamers recently mentioned negative interest on savings as an option to cushion the blow should ECB further reduce interest rates, resulting in a furious backlash from customers on social media.