[HN Gopher] Negative interest: Danske Bank changes threshold for...
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Negative interest: Danske Bank changes threshold for personal
customers
Author : awb
Score : 72 points
Date : 2021-05-02 20:03 UTC (2 hours ago)
(HTM) web link (danskebank.com)
(TXT) w3m dump (danskebank.com)
| Svip wrote:
| Some context: Denmark has maintained a pegged currency policy
| since the 1980s, first against the D-mark, then since the Euro.
| To maintain this, the Danish National Bank needs to maintain
| inflation, and that usually entails keeping interest rates below
| what the European Central Bank's interest rate is.
|
| I believe the ECB's interest rate is currently 0 or 0.5%, and
| thus the Danish National Bank's interest rate is negative to
| maintain the DKK loosely pegged to the EUR. This means, it costs
| money for regular banks to have their customers' money at the
| National Bank, and therefore offsetting the cost to their own
| costumers.
|
| Initially, the limited was 750'000 DKK before the negative rates
| would kick in, then 250'000 and now 100'000. Danske Bank is
| hardly alone in this, a lot of other Danish banks have already
| done the same. The slow lowering of the limits is indicator that
| the banks more and more believe that the negative rates at the
| National Bank will remain with no end in sight.
|
| Disclaimer: I am not an economist.
| IkmoIkmo wrote:
| So there are various ECB rates, the one that's key here is the
| deposit facility rate. It's the rate at which banks can deposit
| money with the ECB overnight. This means if there's tons of
| excess deposits from customers, this rate applies. It's
| currently -0.5% so banks have an incentive to not become the
| bank of choice for cash hoarders, plus there's obvious
| incentives for many banks to try and push its users to other
| products such as brokerage which many banks offer in some form.
|
| This is why you find these negative rates in many more
| countries in Europe. The Netherlands and Germany, for example.
| My bank charges negative interest, too, above 100k.
| airstrike wrote:
| Also not an economist, but topics like this always remind me of
| the Impossible Trinity and how different countries solve for
| different pairs of policies out of the three available choices
|
| https://en.m.wikipedia.org/wiki/Impossible_trinity
| legulere wrote:
| There are three main interest rates of the ecb:
| https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...
| Ekaros wrote:
| I'm actually surprised how low the threshold is... 13500EUR isn't
| too much.
| jandrese wrote:
| That really is quite low. I guess they don't get the constant
| PSAs that you should always maintain 6 months worth of salary
| in savings to handle emergencies?
| jopsen wrote:
| You could also sign-up for unemployment insurance if you live
| in Denmark.
|
| At around 2500 USD / month for up to 2 years, it's a pretty
| decent deal for average Joe. I think I pay around 800 USD /
| year for unemployment insurance.
|
| In practice, I'll probably never need it though.. so I have
| considered dropping it.
| razius wrote:
| You have to consider as well that the typical down-payment for
| an apartment is around 40k EUR. So it's incredibly frustrating
| for those that are looking to save.
| seibelj wrote:
| Consequence of easy money environment. I would say Buy Bitcoin
| but that goes over on HN like a lead weight.
| lmilcin wrote:
| Bitcoin is a very volatile investment while people who keep
| money are looking for extreme safety. Because if they could
| accept just a bit more risk they could be investing in a lot
| other things with better returns like, you know, bonds.
|
| So no, bitcoin is definitely not a replacement for cash
| deposit.
|
| As to "lead weight", that is very good. There is enough people
| on HN to see through bullshit and understand Bitcoin for what
| it is or is not.
| argvargc wrote:
| It is very volatile yes, and over twelve years this
| volatility has returned a 3x on investment on average, every
| year. Conversely, for someone deciding between the two,
| holding fiat has been equally as volatile, and returned a
| ~66% loss each year by comparison.
|
| People looking for extreme safety might want to at least put
| a tiny bit into Bitcoin or some other crypto. Certainly,
| they'd be significantly "safer" now had they done so at any
| point over the past decade.
| Traster wrote:
| >People looking for extreme safety might want to at least
| put a tiny bit into Bitcoin or some other crypto.
|
| This. This is why people put money in bonds and gold. It's
| not a get rich quick scheme, it's an uncorrelated asset.
| Which BTC absolutely might (heavy emphasis on might) be.
| BTC is a perfectly valid hedge, but beyond that it's
| speculation.
|
| At the start of 2018 BTC hit around ~17k, it took 2 years
| to get back to that price and the history of this asset
| means you can't even expect that to be predictive. So be
| careful.
| yuvadam wrote:
| Bitcoin is exactly the insurance policy you want on the
| possibility of fiat collapse.
|
| Also please point me in the direction of these "better-
| return" bonds.
| x775 wrote:
| This is not terribly uncommon in Europe; let alone Denmark. As
| with the other banks in Denmark doing the very same thing, Danske
| Bank is merely passing their own expenses onto their customers
| [0]. There is probably a discussion to be had about where the
| specific thresholds should be in terms of both stimulating the
| economy through encouraged spending versus ensuring people save
| an adequate amount.
|
| [0]
| https://www.nationalbanken.dk/en/marketinfo/official_interes...
| nawitus wrote:
| What other banks do this in Europe (outside of Denmark)?
| Denvercoder9 wrote:
| About every bank in the Netherlands, though it usually starts
| at either EUR100K or EUR250K, so that's a bit higher limit
| than this Danish bank.
|
| I don't think this policy is actually a problem for many
| people here. Most people above that limit either invest it,
| put it into a "savings deposit" (you agree to not touch the
| money for some pre-definied time and in exchange you get
| better, positive interest rates), or spread it out across
| multiple banks (since savings accounts are usually free, but
| only guaranteed up to EUR100K when the bank fails).
| cr1895 wrote:
| Major banks in the Netherlands do.
| Svip wrote:
| I know it is also happening in Switzerland.[0][1]
|
| [0] https://www.moneyland.ch/en/swiss-banks-with-negative-
| intere... [1] https://www.swissinfo.ch/eng/business/swiss-
| national-bank_wh...
| [deleted]
| tom_mellior wrote:
| In Austria the Supreme Court of Justice (OGH) specifically
| ruled that banks aren't allowed to do it. At least for
| private people's savings accounts. Banks are pretty happy to
| raise various service fees though, so I guess they'll get
| creative about getting their money back.
| chefkoch wrote:
| Some german banks do it also.
| lumost wrote:
| Thinking this through, as a rational economic actor.
|
| You won't save cash in a bank, it's literally better to put it in
| a safe.
|
| You won't buy a productive asset, that'll just lose value as more
| people buy the same asset - lowering the value of the goods it
| produces.
|
| Which pretty much leaves assets that are inelastic to demand e.g.
| housing, stocks, art, unique jewelry etc.
| DangerousPie wrote:
| Yes, the whole point of these ultra-low interest rates is to
| increase spending.
| Traster wrote:
| As a rational actor, all returns are the same when adjusted for
| risk, so you continue to stick your emergency savings in the
| bank, and diversify your less immediate investments. As a real
| investor you're probably just going to flee domestic
| investments in favour of the returns of the S&P500.
| CaptainNegative wrote:
| All returns in the space of rational strategies* are the same
| when adjusted for risk, which is tightly related to those
| vehicles subject to classical market forces. A lit oven is
| not a particularly great place to stash your cash, even on a
| risk-adjusted basis. I don't know the particulars of the
| situation in Denmark, but they could be intentionally making
| savings an irrational decision so that rational money flows
| elsewhere.
| gruez wrote:
| >You won't save cash in a bank, it's literally better to put it
| in a safe.
|
| That costs money too. You need a safe, space to put the safe,
| and bear the risk of the safe getting robbed. Sometimes paying
| 0.75% might be worth the hassle.
| colechristensen wrote:
| Alternatively you won't save as much and spend more on things
| without future monetary value (experiences, services, etc)
| pharke wrote:
| If this impacts the psychology of people saving money, it's
| just as likely to prompt them to save more. It's not like
| we're saving our money just for the sake of having a big
| number on our accounts. We usually have specific goals in
| mind such as large investments, funding a business, moving,
| home ownership, early retirement, etc. It's also making
| precious metals seem a lot more appealing despite their
| inconvenience.
| nocommentguy wrote:
| "Bitcoin has no utility"
| bidirectional wrote:
| Everyone who bought Bitcoin 2 weeks ago has already experienced
| far greater negative losses than any Danish bank customer will
| over the next year. Danes can buy US government bonds quite
| easily if they want risk-free positive yields.
| rawtxapp wrote:
| In all of Bitcoin's existence, at today's price, there's only
| few time ranges where you would have lost money, if you just
| held on, you made it back and then some.
|
| Of course, past performance doesn't indicate future, but so
| far, BTC has performed much better than fiat consistently.
| bidirectional wrote:
| While this is true, there has actually been no point since
| Dogecoin's inception where buying Bitcoin was the better
| option (denominated in fiat, of course).
| rawtxapp wrote:
| For much of doge's existence, it was worth practically
| nothing and still has very low trading volumes compared
| to BTC, so you can't easily get in and get out of a
| position. Tesla was able to sell 200M$ worth of BTC
| relatively easily, can't necessarily do the same with
| Doge.
| nocommentguy wrote:
| So how does this invalidate the parent comment's point?
| If Dogecoin was a better hold than Bitcoin does that
| somehow imply that Bitcoin is a worse hold than dollars?
|
| And before you lecture about the function of fiat
| currency, remember the bottom half of society is forced
| to keep their entire net worth in cash because they are
| in a continuous financial emergency...
| bidirectional wrote:
| It doesn't. I just don't believe in advocating for
| regular people to hold highly volatile assets with
| unpredictable performance.
|
| The bottom half of society also hold large amounts of
| debt, one of the key functions of inflation is eroding
| the value of that debt. A currency like Bitcoin does not
| provide for this.
| colonwqbang wrote:
| I don't understand how the bank incurs an expense by accepting a
| deposit? Is the bank required by some government regulation to do
| something expensive with the money?
|
| Or is the "expense" just that the bank's profit would decrease
| when interest rates on loans go down but those on deposits stay
| put?
| airstrike wrote:
| Interest rates are invariably linked to exchange rates. You get
| to pick one of the two to determine the other (assuming free
| capital flows)
| DangerousPie wrote:
| The banks also have to pay negative interest rates to store
| money.
| codeecan wrote:
| Wouldn't this cause a bank run? Why are people keeping money
| there if they're getting charged 0.75-1% interest.
| vmception wrote:
| People are willing to pay the government to specifically not
| invest in the trash options in the market
|
| They'd probably be willing to pay a lot more, -5% yielding
| government bonds anyone?
| jerf wrote:
| For _Homo Econimus_ , the fake economic model, sure.
|
| Real humans tend to move in crowds, though. Everyone will stay
| in until relatively suddenly, everyone will start getting out.
| Perhaps there will be a precipitating event, maybe it'll just
| be time. It's the same thing as trying to time the market.
| lifty wrote:
| When everyone wants to get the money out, they won't be able
| too. There are limits on how much cash you can take out and
| those limits can be decreased.
| dusted wrote:
| Problem is that all banks have this.. so you either suck it up,
| or put your money in many banks to keep below the threshold,
| but that becomes difficult to manage.. The alternative is
| investing them which is probably okay if you know you won't
| need funds immediately available, but since everything points
| to the next financial crisis, it'd probably be better to wait a
| bit with investments..
| Svip wrote:
| So far, it appears that most people are either willing to suck
| up the interest _or_ invest them. There aren 't a lot of
| withdrawals going on. Probably still less safe to sow the cash
| into a mattress than paying about 600 DKK a year per 100'000
| you have above 100'000.
| eikenberry wrote:
| I'd think the competition would be safety deposit boxes, not
| a mattress. So it depends on how much the smallest safety
| deposit box costs per year.
| Ekaros wrote:
| Too bad 500EUR notes have not been issued since 2 years
| ago... Makes it much harder to store money as cash...
| vidarh wrote:
| A lot of banks explicitly prohibit storing currency that is
| still in circulation in their safety deposit boxes.
| dusted wrote:
| Thing is that safety deposit boxes are rarely insured for
| as much money, and they do also cost something.. Another
| problem is that since our economy is almost entirely
| digital, you can't actually withdraw or deposit large
| amounts of cash without significant problems with paperwork
| and fees. You're going to have a bad time trying to buy a
| new car, house or even high-end TV with cash here :D
| jopsen wrote:
| Hmm, I have personally considered if I could pay my taxes
| extra early!!!
|
| I even if I loose my job and don't need to pay so much, I'm
| sure the government is good for it and can pay me back :)
|
| Sadly, I still have to pay interest if I don't pay taxes on
| time.
| mustafa_pasi wrote:
| No it just causes more money to go into the stock market as
| people put everything except a nest egg, there. I wonder
| whether this ends up decreasing consumption, as people are less
| able to buy impulsively when their money is locked away.
|
| But in my opinion what our problem in Europe is, is a very
| conservative investment culture at the very top. It is very
| hard to get funding for anything. No wonder there is barely any
| growth. Even most flashy startups here get money from
| government grants.
| jVinc wrote:
| > No it just causes more money to go into the stock market
|
| A bank run is when people pull their money out the banks. If
| you want to put your money in the stock market you need to
| pull it out of the bank.
| mustafa_pasi wrote:
| The banks themselves act as the brokers in most cases.
| Sometimes the banks themselves get the money because a lot
| of people put their money in structured investments managed
| by the bank itself.
|
| They aren't pulling the money out of the bank and using a
| third party broker.
| kerng wrote:
| Chase charges a $15 or $35 (dont remember exactly) minimum
| balance fee or something monthly - seems like the same idea.
| Banks are kinda hilarious in what they think they can get away
| with.
|
| So, I'm switching more and more accounts over to DeFi
| infrastructure over the last year, but getting direct deposit
| there is still a bit of an issue for employer.
|
| The institutions I do like are smaller Credit Unions.
| lotsofpulp wrote:
| Chase collecting money from a depositor for maintaining
| insufficient money seems like the opposite of Danske Bank
| collecting money from a depositor for maintaining too much
| money.
| lend000 wrote:
| The problem with Defi is that you can't actually get loans,
| despite that being the whole purported point. It doesn't
| replace a mortgage if you need to put down 125% collateral.
| seibelj wrote:
| From the saver's perspective it doesn't matter - it pays
| regardless. From the borrower's perspective it lets you get a
| loan on crypto without actually selling. It is the same
| principle as a portfolio line of credit except
| overcollateralized.
| m00dy wrote:
| If you are a foreigner living in Denmark, it is really hard to
| get mortgage loans due to unexplainable risks. (e.g. They don't
| tell you why you are in a risk group. )
|
| Anyway, the maximum amount of deposits is now around 4 months of
| wage. So, I hardly see the necessity to have a bank account or
| banking infrastructure.
|
| I wish I could join "We don't need banks anymore" motto. But now,
| It looks like It is becoming a reality.
| lifty wrote:
| You shouldn't have savings. You should spend it to help the
| economy /s
| throw0101a wrote:
| You should have an emergency fund. After that you should be
| investing for retirement, or any other larger goals you may
| have, e.g., home ownership, replacing car.
|
| But having a pile of money beyond those things "just because"
| does not really serve the purpose of money: as a medium of
| exchange for goods and services. Money _in itself_ is not
| useful, it is only useful for the things it can give you:
| shelter, water, food, and the various other things as you
| work your way up Maslow 's hierarchy.
|
| At most having a (digital) pile of cash may help you sleep at
| night (assuming it's covered by deposits insurance). Paying a
| fee may be worth peace of mind.
| DangerousPie wrote:
| This but without the /s.
| wait_a_minute wrote:
| Nah
| m00dy wrote:
| This is not my first time that I hear about this. Two of my
| danish friends told me exactly the same without /s :). Why
| shouldn't I have savings ?
| lifty wrote:
| Savings are a drag on the economy. It's negative
| aggregate demand and we can't have that. While I don't
| have any proof, I have a feeling that the negative rates
| environment is making people even more scared of spending
| money.
| gruez wrote:
| It's hard to tell whether something's sarcastic or
| sincere in this thread, but on the off chance that you
| are sincere:
|
| >Savings are a drag on the economy
|
| Savings don't sit in a vault somewhere. They get
| reinvested into the economy, providing capital.
| lifty wrote:
| My previous statement is not sarcastic but should also
| not be taken as fact. It's more like theory and I doubt
| we know how far it strays from reality. Yes savings get
| invested but not all money flows are equal. For example,
| stock buybacks might have a lesser impact on economic
| velocity compared to consumption spending.
| rawtxapp wrote:
| You need to be a slave to the system, always chasing the
| next shiny thing, who will bankroll useless material
| consumption otherwise? People don't save for rainy days
| and when things go south, everything collapses and the
| system is too fragile.
| 0xfaded wrote:
| Because Danes have generous pensions partly funded by
| foreigners who somewhat reliably leave the country after
| a number of years.
| throw0101a wrote:
| And the foreigners can often use their time in Denmark as
| contribution credit to their own social security. Canada
| for example has a few such agreements, include with
| Denmark AFAICT:
|
| * https://www.canada.ca/en/revenue-
| agency/services/tax/canada-...
|
| * https://retirehappy.ca/social-security-agreements-cpp-
| oas/
| sharpneli wrote:
| Do the mortgages also have a negative interest rate or are they
| cappoed at 0?
| jopsen wrote:
| I was looking at mortgage for a house, paying 30% upfront, so
| I would only need to borrow 500k USD.
|
| At fixed rate 30yr, it was 1% + some fees.. so total cost of
| the loan over 30 years would be 35k USD.
|
| The flex interest rate (adjusted every 5 years) was a current
| rate -0.25 + fees. In total that would cost around 10k USD
| over 30 years. (Of course with flexible interest rates, the
| rates could go up).
|
| So I think most of the cost is now just fees... Looking at
| owning vs. renting it's quite competitive.
| [deleted]
| razius wrote:
| Capped at 0 and you pay all kinds of fees on top.
| dusted wrote:
| Some actually do
| heipei wrote:
| Most banks in Germany do this too, and have been doing it for a
| while, both for private as well as business accounts. The limits
| are sometimes well below the EUR100k insured deposit that you
| typically don't want to exceed.
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