(Adds comment from FSA director, client survey results, background)
COPENHAGEN, Oct 3 (Reuters) - Danish lender Spar Nord said on Thursday it will impose negative rates on large deposits by private clients, making it the third Danish bank to do so, in a move that could send wealthy clients running.
European banks say they are struggling under negative rates imposed by central banks but few have imposed negative rates on private clients so far.
“It is now clear, that negative rates are not a passing phenomenon,” CEO Lars Moller said in a statement.
Spar Nord, Denmark’s sixth biggest bank, will introduce a minus 0.75% interest rate on deposits by private individuals holding more than $110,000 in their accounts, while lowering the already negative rate for corporate clients to 0.75% as well.
“We believe it is both natural and in line with the monetary policy intentions of the ECB and Denmark’s Central Bank that negative rates to a larger degree also materialise on the deposit side,” Moller said.
Denmark, which was among the first countries to introduce negative rates in 2012, cut its key deposit rate to minus 0.75% last month, a record low among developed economies.
The second largest bank in Denmark, Jyske Bank, said in September it had to pass on part of the costs of negative interest rate to customers, when it announced a similar move.
Jyske said it hoped rates would not go any lower, but could not make any promises.
“At some point, there is a lower limit for how far central banks will go, and I don’t think we are far from it,” Jesper Berg, director of Denmark’s financial regulator, told Reuters at a banking conference on Thursday.
“We are not there yet, because people have not gone into cash yet,” he said.
A survey of 1,000 wealthy individuals in Denmark showed that only 8% of respondents would accept paying interest rates on their private deposits, with the remaining 92% wanting to pull their money out of deposits and placing it elsewhere.
The survey, published last week by Danish financial publication Oekonomisk Ugebrev, showed that 7% said they would take out cash and place it at home or in a deposit box at the bank.
“The bad scenario would be if people went into cash. That would lead to pressure on the financial sector and a greater risk of people being robbed and so forth,” Berg said.
Spar Nord’s new rate will apply from Jan. 1 2020. It currently charges zero interest on accounts for individuals and minus 0.5% on corporate accounts.
$1 = 6.8157 Danish crowns Reporting by Nikolaj Skydsgaard and Jacob Gronholt-Pedersen; editing by Jason Neely