Please consider Denmark’s Jyske Bank Lowers its Negative Rates on Deposits.
Jyske Bank said on Friday people with more than $111,100 in their bank accounts will be charged more for their deposits as it seeks to pass on some of the costs of recent rate cuts by the European and Danish central bank.
Jyske Bank, Denmark’s second-largest bank, said it would introduce a negative interest rate of 0.75% for all corporate deposits and for private clients depositing more than 750,000 Danish crowns ($111,100) from Dec 1.
Last week, Denmark’s central bank cut its key deposit rate to minus 0.75%, a record low among developed economies. “It is a lot of money and we have to pass on part of this bill to our customers,” he said. “I don’t hope that we will have to go lower but I don’t dare to promise it.”.
Denmark’s largest bank, Danske Bank has said it has no plans to introduce negative interest rates on deposits. Switzerland’s UBS has said it will impose a negative rate of 0.75% on clients who deposit more than 2 million Swiss francs ($2 million). ($1 = 6.7559 Danish crowns)
Simple Question
If you live in Denmark and have a bank account in excess of $100,000 or so, why would you have it at Jyske Bank which charges 0.75% while Danske Bank, the country’s largest bank doesn’t?
Possibilities
- There is something seriously wrong at Danske Bank and people don’t trust it.
- Danske Bank welcomes deposits and can do something with the money. But if so, at what risk?
Any Danish readers care to answer?
Perhaps we have an answer from Bloomberg in the following discussion.
Jyske Shares Jump on Interest Rate Charge
Bloomberg reports Negative Rates Just Got Real for a Record Group of Bank Clients
Shares in Jyske closed more than 5% higher marking their best performance since December 2017, as investors calculated the impact that the new policy will have on the bank’s net interest income.
Jyske has “set the ball rolling,” said Per Hansen, an investment economist at broker Nordnet.
Other Bank Comments
- A Danske Bank spokesman said, “We cannot comment on competitors’ prices and have nothing new to add on the matter.” The bank has previously promised to protect retail depositors from negative rates.
- Nordea Bank Abp spokeswoman Tenna Schoer said the Danish unit is “monitoring the situation closely.” The bank’s CEO Frank Vang-Jensen has previously said Nordea can’t rule out imposing negative rates on retail depositors.
- Sydbank, which has already said it will impose negative rates on retail depositors with over 7.5 million kroner, is monitoring the situation. “We have taken note of developments in the market and have seen that interest rates have fallen further,” said Jan Svarre, deputy CEO at the bank. “We’ll investigate our options and where the limit should be, and then we will return and notify our customers directly.”
Per Hansen commented “imposing such a policy is politically difficult for Danske, given its recent history of financial scandals. The bank is being investigated for a $220 billion money-laundering affair, and has been reported to the police for a separate case in which it overcharged retail investors.”
Bonus Questions
- What happens to Danske if all the Danish money flees to Danske?
- What happens if everybody takes their money and runs?
Regardless of the answers, I expect to see an increased demand for gold, the US dollar, US treasuries, and safes as these pass-through policies escalate.
Please recall what happened in Japan on far less negative rates: Safes Sold Out in Japan: Customers Hoard Cash in Response to Negative Rates
A week ago I commented on the ECB’s Counterproductive QE: Whatever It Takes Morphs Into “As Long As It Takes”
European banks are getting killed on these policies.
Ball is Rolling
Jyske has “set the ball rolling,” said Per Hansen.
Yes, and if Central Banks stick with their “as long as it takes” approach, the results are likely to be disastrous.
Mike “Mish” Shedlock
Is that 0.75% interest charge annually, monthly, weekly, or daily ?
Someone familiar with Danish adn Swedish or German or wherever law might comment: How legal is it to take my money out of this strange banking situation and deposit it in a bank outside the country? I suppose there are foreign exchange cost issues.
Where would you go? And what yield would eliminate the costs of transfer, exchange of currency and possible taxation? I’d consider hard assets, like real-estate or physical PM’s. If only to preserve your wealth and potentially create some income, which is now absolutely impossible if you’re not willing to take risks and you’re just a responsible and prudent saver.
Try http://www.goldmoney.com
http://www.transferwise.com
The San Fransisco economic miracle — taking a money losing companies IPO and ignoring the rats, homelessness, plague, hepatitis, and garbage piles — seems to be breaking down. WeWork is exposed as a giant liability, Uber/Lyft lose money and don’t even pay enough to cover wear&tear, and Tesla just sent a heavily modified electric car to break down on the Nurburg Ring (it was powered by a diesel engine driving the generator for the battery!). Turns out the free sh!t fantasy has a few holes in implementation.
Japan just proposed their 999999th fiscal stimulus plan, and this time they are really really serious. And stop asking about the Fukashima nuclear plant, OK?
The ECB started its latest ponzi scheme disguised as stimulus, and this Jyske Bank news has spawned a black market cottage industry in avoiding bank fees. None of the EU anchor countries look like they can keep themselves afloat never mind subsidize Brussels.
The US military has achieved yet another glorious victory in whichever hell hole, but rebel groups in those hell holes continue to operate with impunity even under martial law.
China’s army could squash the protests in Hong Kong in seconds if ordered to do so, but even the egotistical communists know that doing so would shut down Hong Kong, Shanghai and Tainjin in seconds — devastating China’s “growth miracle” (aka capitalist oasis within communist sh!t hole).
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With many victories like these, the central planners don’t need a defeat
George Carlin said it….I say it again. Just think of the stupidest person you know and then realize, most people are even dumber than that…..
We have bread, circuses and screens in our phones, cars and toasterovens and the debtslaves hunger for more. Just whip out the creditcard and stand in line for 8 hours to get your lastest stupidsmartphone so that you can voice your opinion on social media about genderissues, white supremacy and the patriarchy….because let’s just totally ignore the root cause of most of the injustice, inequality and larceny.
You don’t have to stand in line. You can order your new smartphone in advance and it will be delivered to you the day of release. What more do you need ?
Harry-Ireland wrote “because let’s just totally ignore the root cause of most of the injustice, inequality and larceny.”
That root cause would be the central planners, woke-sters, and all the self righteous people who insist that free sh!t is a human right?
I’m just saying, each time the central planners implement another of their “control” plans (like charging 75bp for bank deposits)… it not only shows how desperate they are. It also highlights that the controls aren’t working.
Yup, that’s the root cause. And indeed, it’s not working anymore. They haven’t been able to ‘fix’ it after the longest cycle in history and by resorting to these measures, we now know how bad the situation really is and what’s to come in the next few years. Because this is going to have a massive, massive impact on future generations as well as our retirement. Now all we need is a war to distract the general public and we might see the endgame coming into play. I’d bet it involves Lagarde, all the CB’s and MMT.
Postcard from Denmark. In Jyske Bank everything is up for negotiation. List rates may be negative but clients can negotiate a better deal. Danske Bank is largest bank and competitor but hurt on reputation with money laundering scandal of 150 bn USD.
However we Danes are also enjoying mortgages with negative nominal rates and effective rates close to zero. So house prices are stable despite tightening of credit standards.
“However we Danes are also enjoying mortgages with negative nominal rates and effective rates close to zero.”
So now your house prices are inflated too – that’s not stability!
I appreciate your subtle sarcasm.
Some of the stress is down to Eurk vs Kr. How long before Denmark is forced to join the Euro?
Forget the Maastricht opt-out, one way or another that can be worked around.
Next is to make it onerous to withdraw large sums if you are a wealthy non-corportate customer. Full chapter and verse will be needed on the intended use of the withdrawn capital.
Borrowing from Mish, a musical tribute: link to youtube.com
LOL Jackula, I thought it would be the theme to Blazing Saddles.
This is just another symptom of the zombie economy we have. If growth were healthy then negative rates would have never happen.
I suppose this is good news. Negative deposit rates not only shows even the dumbest among us that something is seriously amiss, it hastens the collapse of the whole banking ponzi by destroying confidence once negative rates become commonplace.
I always thought safe-cracking would be a cool profession. If I ever become one myself, I’ll be sure to keep pictures of Greenspan, Bernanke, and Yellen in my tool bag for inspiration, right next to my drill, borescope, and plasma cutters!
If you were a safe cracker today Tengen you would break into vaults and leave money behind before you go. I wish you were right about even the dumbest among us, unfortunately millions support the ecosocialist movement and the First Church of Man Made Global Warming has lately taken a huge leap forward in their sophistication regarding the dismantling of our economies. Greta Thunberg, 50% Shirley Temple and 50% Aimee Semple McPherson, the poster child for the generation that eats Tide Pods and demands we all stop using fossil fuels within 10 years, even inspired a mass rally here in this county last week.
I do wish we would have a serious discussion about the dangerous (as well as impossible) Green New Deal and it’s absurd timeline, because this situation is getting out of hand and without a calm and sharp leader like Mish to facilitate the discussion many of us are going to be force soon to shut the hell up about the absurdity and destruction of this exponentially growing movement, like lemmings in a headlong rush over that economic cliff, and of course just as baby boomers intentionally wrecked the environment out of greed we will also have wrecked the economy to “get back at them,” a sentiment already surfacing in social media. More experienced people (older) can only hold out for so long before being shouted down.
I could imagine deposit rates at the CB work out very differently for various banks, depending on the composition of their balance sheet and possibilities to circumvent parking too much cash at the CB. Probably a very technical and elaborate explanation for why different banks are behaving in different ways.
Most banks in negative rate countries have not yet hit ordinary consumers with negative interest on their deposits, at least, not the sort that most consumers hold.
The idea that you are getting paid to borrow money stirs the imagination, but I am not hearing about any people actually getting such loans, except in some Nordic countries on mortages (which are collateralized by the house, of course). There is a lot of debt trading with a negative YTM, but there are no negative coupons, and most bonds still pay some nominal interest coupons, even if the prices imply a negative return if held to maturity. I don’t see a lot of evidence for the fixed income part of the bond markets reversing and actual cash flows operating in reverse.
“Most banks in negative rate countries have not yet hit ordinary consumers with negative interest on their deposits, at least, not the sort that most consumers hold.”
YET
There fixed it for you.
This is a bet that a bank customer smart enough to amass $100,000 or more in savings is paradoxically too stupid to realize that they can rent a safe deposit box for less than $750 per year in which to store it.
It’s actually harder than you think. First of all, banks hardly have any physical safes anymore, apart from capitalcities. Secondly, it’s not insured or insurance comes as an -expensive- option. Thirdly, it’s goddamn ridiculous we’re even having this discussion…I just can’t believe we’ve reached this absurd distopia where real cash money is worth less than debt.
Ha! Thanks for your third point, by far the best laugh I’ve had today. I totally agree. Perfectly rational people all over the planet are watching these dumb shits and straining to make sense of it as if their actions .were perfectly reasonable.
Just like Americans, I suppose noone ever went broke underestimating the intelligence of the Danish people, either….
If Danes had brains, they wouldn’t be in this predicament to begin with.
I suspect that might be a better bet than you think. To amass money, you have to have a higher inflow that outflow — but both can be temporary conditions; and can have less to do with smarts than other factors. More than that, there are many different kinds of intelligence — for example, I am perfectly capable with engineering and the principles of such, but am not terribly intelligent with money. Now add in that a lot of people may be well positioned (connections get them union management or gov’t jobs), and yet not terribly good with money. Yet others may look at the risks and decide that the bank — were it simply charging fee for storage — is still a better risk management tool than the safe.
Mish mentioned the run on safes in Japan. Those safes can store Yen, but also USD (the $100 bill now has more circulation than $1, and much of that is outside of the USA).
Imagine how much brain power in Japan is being used to think up ways to avoid onerous financial fees? Japan is a very orderly society, with lots of respect for elders and doing things by the rules (most of the time).
Despite Japan’s willingness to obey, authorities couldn’t keep interest rates much below -50bp. Each time they do, the economy grinds to a halt, the ruling coalition collapses, and they are forced to do something else. How many PMs and how many fiscal shock-and-awe plans has Japan gone thru since 1990? Too many to count.
The French are arguably among the more civilized in Europe, and they have a history of putting their monarchs in guillotines. The other countries have a history of being not nearly as nice.
Best case scenario, Europe’s rates will pull back to -50bp… and a lot of brain power will get diverted from productive uses to circumventing dumb rules. The black market will thrive.
Bet on the black market in Europe. Bet against the ECB
Imagine the brain power diverted to when the bank pays YOU when you take out a loan.
Imagination not needed.
Consumers aren’t getting negative rate loans, some corporate bond issuers are.
When corporations compare the return of investing in a new factory, vs the return of buying robots (instead of hiring millenials) — they pick the robots.
When they compare the return on expanding the business versus buying back stock — they buy back stock.
No imagination required
PS — my company interviewed I don’t know how many college grads this year. The general consensus across departments is that we need to automate a LOT more.
The kids coming out of college now, in addition to being burdened with a lot of debt, do not have the skills needed.
Often the cost of automating jobs is less than the cost of deprogramming the kids from left wing activism plus training them in an employable skill.
Lower interest rates only makes substituting capital for labor even more attractive.
It also makes debt for equity swaps — issuing debt to buy back shares — a lot more attractive.
And now the ECB is paying some large hedge funds to bet against the ECB!! That’s some PhD level policy planning there
I laughed at ‘deprogramming from left-wing activism’. Afterwards, I cried because it’s real….they’re real-life NPC’s spouting nonsense and demanding safespaces.
Imagine the lack of brainpower in me, when I saw gold at 995/oz just a few months ago and didn’t take a substantial physical position…
Gold hasn’t been below $1000/ounce since 2009
Priced in EUR it did.
Are you a Yoda wannabe?
“Priced in EUR it did.”
He is in Ireland, and you assume he was pricing in dollars, he is pricing in Euro.
How about this one; In Ireland, certain Credit Unions have implemented a savingscap. It varies from €15.000 to €30.000. There’s 0,00 interest on these savingsaccounts and it mostly serves as collateral against loans.
H-I, I can only imagine the complexities of an Irish CU, I opened a current account at The Bank of Ireland in 2017 and was astonished at the literature that came with it, it was like a college text book complete with arcane formulas for calculating your fees, and interest, and rules about depositing and withdrawal, allowable debits and on and on, and a ton of fine print I cold not even read. Made all the more complex because my retirement pay is deposited by the US Treasury into a foreign account and had to be converted to euro before deposit. God knows what I was getting charged for that, my pay was different every payday.
In fact I still have the debit card in my wallet because I never closed that account. I still had 12 euro and change in it when I returned to the US October 1 of 2017. I just assumed that fees would eventually eat that and they would automatically close it someday. I did my best to get Meteor to terminate my account (they were bought out by another phone provider and my account was so bollixed up I gave up trying to close it) and the same with my Virgin cable account, I may also not have paid the final electric billing because there was no final bill as of the time I left the country, but it would have been very small with just a couple days worth of power used. They just did not have the facility to bill me in America it seems, but then I also found that back in the states most computer forms have a mandatory field for post code that has to be populated in order to complete the form, and in the states it only will accept a 5 digit code (or ZIP + 4) so my Irish post code was never acceptable, meaning it was impossible to finish the forms because that was a required field. All in all going expat is not as easy as just getting on a plane and going somewhere.
I probably owe the BoI a tone of money for not closing that account right? Oh well, let them extradite me if they can find me.
Yup, that’s the Irish bankingsystem for you. Regulations imposed by the Central Bank of Ireland are good for the banks, government, but not the private customer.
Just occurred to me that with negative rates in the EU I may eventually owe the BoI money for not closing that account. I couldn’t though really, I learned long ago never to close an old account that has direct deposits until you see those deposits going into the new account. And there are no BoI branches in North America where I can present my debit and ask them to close it anyway. When I left it was for medical urgency, I did not have time to jump through their hoops. I guess worst case scenario is I am a wanted criminal in Ireland and just have to avoid ever returning. 🙂
I just added this comment
Please recall what happened in Japan on far less negative rates: Safes Sold Out in Japan: Customers Hoard Cash in Response to Negative Rates
(1) I know there are hedge funds already running simulations and placing bets on when Draghi / Lagarde’s “long as it takes” is going to run face first into German bank limits. Those limits have been challenged and upheld by the German high court. Depending on various assumptions, the ECB has 12 months or less. After that, it will stop.
I don’t know if Mish got hold of one of the research reports that big banks are doing on this for their hedge fund clients. There are several floating around. And the funds are running in house simulations too. Remember when the Bank of England promised to do “whatever it takes” (different words, same sentiment) to hold the GBP with the ECU (predecessor of the Euro)? There is a LOT of money to be made correctly guessing when this latest central bank FUBAR will come apart.
(2) The German press is defying calls from Berlin not to publicize what the man on the street is calling the ECB negative rate policy: diebstahlsraten (that is the PG label, there are others that are really nasty). The German savers are running out of patience
(3) The Greeks have a long history of putting their savings into anything other than Drachma. Some went to D-marks, some to Swiss francs, some to other places. The southern EU countries have lots of experience hiding assets from authorities, and will make a mint teaching the rest of the EU how to get around the ECB’s foolishness. They will avoid the ECB’s confiscatory policy, but the price is slower economic growth
In short — the ECB’s policy won’t last long, no matter what the politicians say
What do mean by German bank limits?
“Is there enough physical currency for large numbers of people to take cash and put it in a safe?”
Excellent question: Almost certainly not
Hence the big push to eliminate cash and convert to digital currency only. This will be done under the guise of safety to eliminate black market activity by terrorists, criminals and drug cartels. Its all for our safety and in our best interest. This way we will become the helpless citizens in whom the govt extorts our savings.
Not to mention that CB’s have a near magical ability to kick cans years longer than any of us would ever believe rational or even possible. Like in the mid nineties (1995/6) when I wrote a term paper in college saying that the housing market had to correct because median income no longer supported median house price. It did happen as I predicted it must, but not for another 12 years.
Is there enough physical currency for large numbers of people to take cash and put it in a safe?
No, nowhere near. Physical currency would run out within a month if people started saving by using their mattrasses.
I doubt even a month, a run on the M1 would be a lot quicker than that just because bank runs tend to be panic events. “Money Supply M1 In the Euro Area increased to 8685860 EUR Million in July from 8607237 EUR Million in June of 2019.”
Even lower in the US at $3,839.6 billion. That is from the Fed August 2019 not seasonally adjusted.
It may sound like a lot but remember almost all of it is already in other people’s pockets already, and the M1 includes all “cash” including demand deposits at banks which are still electronic for the most part. Converting your personal holdings to actual cash presumably at the same day everyone else gets that idea means that the banks would be out of actual notes within hours. Stocks of uncirculated bills at Fed and Treasury/bank vaults would take time to put into the system and would still only be a fraction of the nominal liquidity demanded.
By the way, we had an econ prof in college that was fond of giving us basic economic rules in bullet point statements that he then went on to magnify in detail, but it was a good method because the original point stuck even if the later explanations got a bit arcane and lost over time. He said that the only way to destroy money was to take it out of circulation. That is bury it in the back yard or keep it in a safety deposit or home safe, or mattress for example. I think this is a large part of the CB’s enthusiasm for electronic funds only in a cashless society. In the billions of trades per second world of the TBTF institutions that money you are not using RIGHT NOW can be leveraged, even as you sleep, and it is not really profitable for just your cash to get used that way, but multiply by billions of people and suddenly it is a gigantic pile of capital sitting unused. When you are not using it the money is essentially out of circulation, destroyed as it were, till you spend it and bring it back into existence/circulation. And it is not so much about aggregates as it is about control, they CB’s and TBTF’s do not want you having ANY power even as ephemeral as that.
The question should be this: is there enough cash if the banks decide to deposit it in their safe rather than keep it in the ECB account at negative rates.
Not sure about ECB rules but American banks are strictly regulated as to what they can and can’t do with reserves. I think we are seeing them stretch the limit of their capacity in the recent breakdowns of the Repo and Reverse Repo markets. The first day (Tuesday) the Fed offered $75 billion and accepted $53.4 (I am going from memory so not sure about exact decimal point) in collateral, but, the next three days they offered $75 billion each and all three days were oversubscribed. Meaning some banks were requesting cash that did not get it. I have not seen the stats for Thursday or Friday, but Wednesday’s offering was more than $5 billion in disappointed banks. So, those may have had to face opening their doors without enough money to satisfy demands. Nothing terrifies or pisses off bankers than the bank having to use a penny of their own corporate account to meet customer demand. When I worked in the corporate trust department of a major regional bank in the Midwest the woman that normally paid (by wire to the DTC in NYC) the bank’s obligations had a conference to attend in NC for a week. She delegated the task of making a $103 million payment for the bank Friday that week and left me written instructions to follow. The instructions said that because of the amount of that payment it had to be made at 3:50 on the due date, any earlier and the bank would lose money by paying too soon, any later and you risked not getting the wire transfer done that day and that meant not paying the obligation till Monday. And I was told that if I missed the payment getting to the DTC by the close of the Fed wire at 4 p.m. I had to get on the next plane for NY to pay in person. The paperwork was actually really simple, it was exactly the same as filling out a deposit slip, and looked like the same deposit slips you have in the back of your own checkbook. The problem for me was the slip she left me only had room for digits up to $99,999,999.99 and she apparently did not realize that a single deposit slip was not sufficient. This was the largest payment in a long time I suppose. So I improvised and made out two slips, one for $50 million and another for $53 million, but then came the real problem, all Fed wire transfers at this bank over $10,000 of the bank’s cash account had to be countersigned by a bank officer over VP rank. Since few (none actually) ranking officers knew this mere clerk in the Corporate Trust Department I could not find anyone willing to countersign the disbursement of $103 million of the bank’s own funds. For all they knew I was going to wire it to an offshore account in the Cayman Islands.
My own boss that day was out. So, I took the wire transfer slips to the wire office downstairs and explained it to the head of that department and she got the CEO out of his office and down to okay it. Barely got out in time too. You would be amazed to realize that holding $103 million in (negotiables) your hands feels no different than holding a buck.
When you are dealing with such large numbers the interest can be calculated by the second and the bank would fire you for costing them anything that was not absolutely necessary, they were ruthless about this.
that makes this discussion more concrete, thanks
As the world decends into madness, the common man looks for answers.
“Regardless of the answers, I expect to see an increased demand for gold, the US dollar, US treasuries, and safes as these pass-through policies.”
The common man can’t understand that of you put money in the bank, instead of earning interest from the bank, he will have to pay interests to the bank. This is ridiculous. If I was in one of these two European countries, I’d put my money outside those countries to earn interests. I am not an economist, but I imagine these negative rates will result in capital flight.
I think that has been one of the very few things keeping equities in America from collapsing already, that and stock buy backs are all there is now.
The common man also is conditioned to think that when the powers that be say everything is great, employment is great, inflation is tame, stocks are at records, then any failures in personal finances must therefore be personal failures, it is not the Fed, nor the federal government, nor the banks, nor the speculators, but your own damned fault every day gets harder to get by. If Donald Trump says we should have deeply negative rates because it is great for him and the rest of the 1% they do not understand that the trickling is not going to be pleasant, it will be yellow and smell foul, especially if the big boys had asparagus the evening before.