for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up

Enough is enough: Danish minister cries foul at banks' negative rates

COPENHAGEN, April 27 (Reuters) - Danish lenders have gone too far in their efforts to pass on the costs of negative interest rates to customers, Denmark’s business minister said on Tuesday, drawing incredulity from the banking industry.

In 2012 Denmark became the first country in the world to impose negative rates, a trend since adopted by some other countries as developed economies faced both weak inflation rates and changing savings patterns by consumers and businesses.

The Danish central bank’s introduction of negative rates - forcing lenders to deposit funds at the central bank at negative rates - prompted most Danish banks to start introducing negative interest rates on private clients’ deposits in 2019.

“I think it should stop now. The limit has been reached,” Business Minister Simon Kollerup said in a post on Facebook on Tuesday.

“It simply becomes too greedy when the banks deliver large profits, but still continue to impose negative interest rates on more and more Danes,” Kollerup said.

Kollerup was not immediately available for further comment when Reuters contacted his office.

The threshold for when a client starts paying negative rates has gradually been lowered and most lenders now charge clients on deposits of more than 100,000 or 250,000 Danish crowns ($16,230-$40,577).

Denmark’s biggest lender Danske Bank said on Monday it had lowered that threshold to 100,000 crowns after seeing a rise in deposits at the bank.

Kollerup said he had invited banking association Finance Denmark to come up with a solution. “I expect to hear the industry’s response on how we can stop this spiral,” he said.

Finance Denmark welcomed the opportunity to speak with the minister, but said it was “fundamentally wrong” for politicians to interfere with pricing by any kind of business.

“Danish banks did not invent negative interest rates. They come from Denmark’s central bank,” Ulrik Nodgaard, head of Finance Denmark, said, adding that banks generally turn less profit than other industries.

At Denmark’s biggest banks, profits dropped by almost a third last year, mostly due to large provisions linked to the pandemic and rising compliance costs, according to Finance Denmark.

Lars Christensen, an independent Danish economist, also criticised Kollerup’s comments.

“At best, it is an expression of a minister who does not understand quite simple financial and economic contexts,” Christensen said. “At worst, it is an expression of extreme populism.”

Around 35% of private clients’ deposits were subject to negative rates in February, Denmark’s central bank said in an analysis published on Tuesday.

The analysis showed that while Danes usually reduce their deposits after banks impose negative rates, total bank deposits have kept increasing.

$1 = 6.1611 Danish crowns Reporting by Nikolaj Skydsgaard; Editing by Susan Fenton

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up