Negative ECB rates fuel demand for safe deposit boxes, German banks say

DUESSELDORF, Germany, March 17 (Reuters) - The European Central Bank’s negative interest rates are sparking demand for safe deposit boxes, where bank customers can store cash to avoid the prospect of paying the bank interest on their accounts, German bankers said.

The ECB last week cut its main interest rate to zero and dropped the rate on its deposit facility to -0.4 percent from -0.3 percent, increasing the amount banks are charged to deposit funds with the central bank.

“Lockboxes are in vogue,” Hans-Bernd Wolberg, the chief executive of German regional cooperative lender WGZ, told a news conference on Thursday.

Some of WGZ’s industrial or medium-size corporate depositors are being charged negative rates for large deposits on a case-by-case basis, but so far retail depositors have been spared.

“With savers, we’ll avoid it for as long as possible,” Wolberg said.

German reinsurer Munich Re this week said it was increasing its gold and cash reserves in the face of the ECB’s negative rates.

Some Germans public-sector savings banks in Bavaria have already studied whether they should store cash in their own safes rather than deposit it with the ECB, Georg Fahrenschon, the head of the DSGV savings bank association, said this week.

While they found it was not yet worthwhile with the deposit facility at -0.4 percent, some retail depositors were already taking action, he said.

“Demand for customer deposit boxes is continuously growing,” Fahrenschon said at the DSGV’s annual results news conference.

Thin lending margins meant savings banks would need to derive more income from charging fees to customers for services that used to be free, he said.

“The days of free giro accounts are over,” he said.

Reporting by Matthias Inverardi, Andreas Kroener and Alexander Huebner, writing by Jonathan Gould, editing by Larry King