(In paragraph nine, removes reference to "last month")
MILAN, Oct 14 (Reuters) - UniCredit will only apply negative rates to customer deposits of more than 1 million euros ($1.1 million), the Italian bank said on Monday, clarifying comments by its CEO last week which drew angry reactions from unions and consumer groups.
European banks are grappling with the consequences of the European Central Bank's September decision to cut its key deposit rate further into negative territory, making it tough for banks to earn money from their traditional lending business.
UniCredit Chief Executive Jean Pierre Mustier last week said the bank was working on measures to pass on the European Central Bank's negative rates to customers holding more than 100,000 euros in their accounts.
Italian banking unions were critical of Mustier's announcement which they described as "reckless".
Consumer group Codacons said it would fight banks in the courts that planned to hit customers with negative returns on deposits.
A UniCredit spokesman said the negative rates would only apply to clients with more than 1 million euros in their bank accounts, meaning less than 0.1% of the bank's client base. And customers will be offered a number of alternatives.
"We will offer as an alternative investments in money market funds targeting positive returns, with no fees charged," the spokesman said.
"For ... deposits with a balance in excess of the 1 million euro threshold, ad hoc measures will be discussed with clients to take into account the extraordinary changes in the macroeconomic environment."
Mustier, speaking in his capacity as Chairman of the European Banking Federation earlier this month, urged the ECB to take action to reduce the impact of negative interest rates on banks, recommending general charges for cash deposits.
Italy has high levels of private savings, where people have been increasing current account deposits this year to reach 1.17 trillion euros in August, according to Italy's central bank.
Banks in Italy are currently free to charge for cash deposits, but most avoid doing so, fearing depositors would transfer their savings to other lenders.
Italian banks are taking countermeasures against negative rates through fees, Banca Generali CEO Gian Maria Mossa said in an interview published on Monday.
"UniCredit had the courage to stir up a debate which was already taking place abroad, for example in Switzerland ... (but) I don't think in the end single banks will apply negative rates," he told daily La Stampa.
UBS in July said it would impose from November a negative interest rate of 0.75% on wealthy clients who deposit more than 2 million Swiss francs ($2 million) with its Swiss bank.
In Denmark, which was among the first countries to introduce negative rates, Spar Nord said earlier this month it would impose negative rates on large deposits by private clients, making it the third Danish bank to to do.
$1 = 0.9064 euros $1 = 0.9952 Swiss francs Reporting by Gianluca Semeraro, editing by Valentina Za and Jane Merriman