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Information on current interest rates

Changed conditions for business current and savings accounts

As of 1 October 2016, the conditions for business current and savings accounts will change. Under the terms of the new conditions, the bank is entitled to charge a negative interest rate. However, this does not mean that the bank will automatically apply a negative interest rate on your positive account balances; this amendment does enable the bank to react to exceptional market circumstances, should that be necessary.

Should these market circumstances occur, then we will do our best to protect customers with a limited balance on their account(s). For example, we may only apply a negative interest rate above a specific threshold. Should a negative interest rate be applicable to your account(s), you will be notified of this timely. In the following sections, you can read more about what a negative interest rate is and how it arises.


What is a negative interest rate?

At this moment, the interest rates of all European banks are exceptionally low; in some cases, a negative interest rate already applies. A negative interest rate means that interest has to be paid on positive (savings) balances, and that interest is received on borrowed money.


How does a negative interest rate arise?

The European Central Bank (ECB) lends money to banks at low rates. This enables banks to lend money to businesses at preferential rates. Under normal circumstances, banks receive interest on the capital deposited at the ECB that has not been lent to businesses; this is called the deposit rate. Since June 2014, this rate has dropped to under 0%; currently it is -0.4%. This means that banks do not receive any interest, but have to pay for any credit held at the ECB. These costs have to be accounted for, therefore this leads to a slightly higher interest rate that has to be paid by businesses for borrowed money.


Why is the interest rate so low?

In recent years, the ECB policy has been to stimulate the European economy by lowering interest rates. Businesses are encouraged to invest money, rather than store it on a bank account. Thanks to the low interest rates, businesses can borrow money more cheaply.


Can the interest rate for clients also become negative?

Clients’ interest rates can also become negative if the ECB rate of the ECB remains under 0% for an extended period. This means that banks have to pay out interest on a number of loans that are currently linked to the market interest rates. A small number of clients will therefore receive interest on their loan.

It is not inconceivable that the client interest rates on current or savings accounts could become negative. Interest rates on business savings accounts have continued to decline, and in some cases they have reached 0%.



Should you have any questions regarding interest rates, please contact your advisor.

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