[FRANKFURT] European bank profits will suffer under the European Central Bank's negative interest rate policy because they find it too difficult to pass charges on to clients, Deutsche Bank's chief financial officer said on Friday.
Eurozone banks have faced the risk that customers' cash deposits, usually a boon, could turn into a burden since September, when the ECB began to charge banks 0.20 per cent interest to park funds at the central bank. "We will have to eat the bill for awhile and I don't know how long banks can stand this," Deutsche Bank's Stefan Krause said in a panel discussion at a financial conference.
Germany's second-largest bank, Commerzbank AG, said on Thursday it was set to pass some of the ECB's deposit charges onto major clients by charging fees.
Other banks have said they were considering similar moves, but few have said outright that big clients will have to pay to park their cash.
Mr Krause said it would be to "psychologically" difficult for clients to accept the idea of paying to deposit cash, forcing banks to absorb the negative margin.
The longer negative rates hold, the harder it will get for banks to foot the bill, he said.
The ECB announced in June that it would push its deposit rate below zero, seeking to combat the risk of the eurozone suffering Japan-like deflation and looking to force banks to lend to small- and medium-sized businesses.