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German banks considering hoarding cash to avoid negative interest rates

Categories : Cash is efficient
June 10, 2016
Tags : Banknote/Note, Cash centres, Central Bank, Commercial bank, Negative interest rates/interest rates, Store of value
Negative interest rates represent significant costs for banks which deposit money with the ECB. Some banks are examining the alternative option of storing banknotes in their vaults.
Guillaume Lepecq

According to Reuters, Commerzbank, one of Germany’s largest banks, which is partly-state-owned, is considering storing banknotes in their vaults instead of paying negative interest rates if they deposit it with the ECB.

A separate article in der Spiegel online, claims that the Bavarian Savings Banks are also examining a similar move. According to the calculations of the savings banks, insuring the money would be cheaper than depositing it with the ECB. However, storage, security and transportation costs also need to be accounted for.

Deposits by European banks at the ECB currently represent over € 850 billion.