German banks hoard more than 50 billion euros in cash


uThis also existed among private individuals, but it was quickly considered a bit bizarre: in the days of negative interest rates, one way of avoiding such interest on savings from the banks was simply to pay large amounts of Cash kept at home. In surveys, 36 percent of Germans said that if their bank were to introduce negative interest rates, they would withdraw their money from their account and keep it in cash in a safe deposit box or at home. In the end, not that many did it, as later surveys showed. Maybe people were too scared after all or balked at the expense of a safe - but the will was there.

The German banks, on the other hand, apparently stored large amounts of cash. Those whom some savers tried to trick with their cash hoarding became the biggest cash hoarders themselves. There had been certain signs of this for a long time: the money transport companies, for example, had hinted at something like this. And some financial managers, but above all from the insurance industry like the former Munich Re boss Nicholas von Bomhardhad described the hoarding of gold and cash in times of negative interest rates as a rational strategy for companies as well.

51 billion euros in notes and coins

A study by Deutsche Bank now shows the extent to which German banks in particular had expanded their cash holdings. It is about a quite remarkable evasive strategy of the banks against the unconventional monetary policy European Central Bank (ECB).

It started with negative interest rates in 2014. The ECB President at the time Mario Draghi had introduced negative interest rates for bank deposits at the central bank – with the note that these interest rates were “for the banks, not for the people”. However, this did not stop the banks from gradually introducing negative interest rates for their customers as well. 582 banks did this at times.

The banks' cash hoarding is said to have started later, according to the study. Namely, when the ECB's deposit rate was lowered further into negative territory in March 2016, to minus 0.4 percent. Initially it was only minus 0.1 percent, later minus 0.2, then minus 0.3 percent. With minus 0.4 percent, however, a threshold was apparently reached from which holding large amounts of cash became more attractive for banks. In September 2019, the interest rate was cut even further into negative territory, to minus 0.5 percent. That was the low point.



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