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Sampo Group CEO: Consumers may have to pay for deposits in future

So far banks have not charged customers for keeping their cash during the current negative-interest-rate era.

Sampo Groupin pääkonttorin ovi.
Image: Vesa Moilanen / Lehtikuva

If the current era of negative interest rates continues, it could soon drive banks to charge consumers fees for their savings deposits, says Sampo Group CEO Kari Stadigh.

Stadigh was speaking to the Bloomberg news agency about the reign of sub-zero interest rates in the Nordic region. Headquartered in Helsinki, Sampo was the parent company of Danske Bank and owns nearly 20 percent of another Nordic banking giant, Nordea Bank.

The Bloomberg article noted that banks have tended to rely on other services such as asset management to generate margins, as opposed to the traditional profits based charges on deposits and lending operations.

According to the news agency, regional banks have so far avoided passing on negative interest rates to private customers over concerns that this might cause a run on deposits.

Cheap services "a challenge" for banks

The head of the Danish banking lobby, Ulrik Nodgaard told Bloomberg that the negative interest rate regime means that banks are essentially selling their service too cheaply, something he described as "a challenge".

However Stadigh called on the European Central Bank, which is the eurozone central bank charged with implementing monetary policy, to stop sidestepping the issue.

"I don't think it would necessarily destroy retail banking at all," Stadigh told Bloomberg. "People would actually then have to pay for their deposits, so actually it could even bring stability to the banking sector."

Prof: Negative rates could cause bubble

Meanwhile Aalto University professor of finance Vesa Puttonen told the business paper Kauppalehti that it is likely that some bank will eventually begin charging ordinary consumers as a result of negative interest rates.

"A few years ago this would have been unheard of, but we are living in unusual times. It was previously predicted that interest rates would normalise, in other words that they would rise. Now many believe that interest rates will remain around zero or be negative for a long time," Puttonen noted.

The university professor said that in the short term negative interest rates would be good for the economy, but over the long term it could lead to a financial bubble, in which the asset prices are inflated and do not reflect the assets' real value.

The ECB first introduced negative interest rates back in 2014. The strategy aimed to make it more expensive for banks to hold deposits on hand, thus encouraging them to lend money to investors who would then stimulate economic activity.

Edit: Updated at 8.40pm to reflect that Sampo is no longer the parent company of Danske Bank.

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