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Office of Competition and Consumer Protection

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Negative interest rates on deposits - a standpoint of the Office of Competition and Consumer Protection

< previous | next > 14.04.2021

Negative interest rates on deposits - a standpoint of the Office of Competition and Consumer Protection
  • The President of the Office of Competition and Consumer Protection, Tomasz Chróstny, opposes banks' plans to introduce negative interest rates on deposits of individual customers.
  • Such an attempt could undermine the already strained public confidence in the banking system and could lead to large-scale withdrawals of savings.
  • In his statement addressed to 23 banks, the President of the Office of Competition and Consumer Protection, expressed his concerns and demanded clarifications of whether and what steps of individual banks are being taken in this matter.

According to public media reports and the announcements of the Polish Bank Association, the banking sector is considering the introduction of negative interest rates on deposits and funds accumulated on accounts of individual customers. The above would mean that consumers would be forced to pay the banks for their savings, accumulated on, for example, their current saving and checking accounts, based on which the banking sector grants loans. The President of the Office of Competition and Consumer Protection claims that the signals coming from the banking environment are negative. The President clearly presented his standpoint in the letter to 23 banks.

- The introduction of negative interest rates on deposits will affect consumers and will cause a number of macroeconomic risks. Consumers cannot be punished for saving money. The above-mentioned actions taken by some banks and their industry organisation will certainly undermine the public confidence in the banking system, which is already damaged. Consumers' savings are exposed to the reduction of their purchasing power due to zero interest rates on deposits, rising bank fees and commissions or higher inflation than in recent years. The introduction of negative interest rates on deposits by banks would be an incomparably more powerful blow to consumer savings - explains  Tomasz Chróstny, the President of the Office of Competition and Consumer Protection.   

The introduction of negative interest rates on deposits by banks could force consumers to look for alternative and not always safe ways of investing their money. It could cause, for example, a further increase in real property prices or the development of risky investments. Additionally, if consumers started to withdraw money from banks and decided to keep it at home, the scale of theft and fraud against consumers would most likely increase. Already now, according to the National Bank of Poland, approximately PLN 300 billion is money in circulation - the withdrawal of deposits from bank accounts may further increase the amount of currency in circulation and may expand the grey market. The above is of high importance because banks themselves complain about the high cost of currency in circulation.

The deposits accumulated on the accounts of individual customers are used by banks for loans to other consumers and helps the banks earn money thanks to such services. Positive interest rates on deposits are, in a way, remuneration to the customers from the banks in return for handling their deposits, which is beneficial for a bank, as an institution, from the economic point of view. By introducing negative interest rates, banks would charge consumers a fee for trading their money and making a profit with the use of it.

The President of the Office of Competition and Consumer Protection is going to scrutinise the activities of the banks. -  The situation and the steps taken by the financial sector are being constantly analysed. The introduction of negative interest rates on deposits by any of the banks at non-negative interest rates would be contrary to the principles of social co-existence and good habits. In the case of the above, all possible actions will be taken, within the scope of the competence of the Office of Competition and Consumer Protection, to protect consumers  - claims Tomasz Chróstny, the President of the Office of Competition and Consumer Protection.

According to the Office of Competition and Consumer Protection, the introduction of negative interest rates on deposits would be both legally unjustified and harmful to the entire financial market and economy, particularly due to the changes in the attitudes of consumers towards saving. It is worth noting that, unlike corporate clients, individual customers are able to switch to cash trading relatively easily. European commercial banks are aware of the above, which is why even though negative interest rates have been in force for years in the Eurozone, 99 percent of household deposits are subject to non-negative interest rates. [1]

Therefore, we appeal to the banks to stay reasonable and responsible in this matter and we ensure that the signals coming from the market are constantly analysed.


[1] Data for: Negative Interest Rates: Lessons from the Euro Area, Jens Eisenschmidt and Frank Rafael Smets (ECB), 2019, https://ideas.repec.org/h/chb/bcchsb/v26c02pp013-042.html

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