[COPENHAGEN] After more than seven years of negative rates, some of Denmark’s biggest banks are resorting to uncharted territory in order to cope with the extreme monetary regime.
At Sydbank A/S, Chief Executive Officer Karen Frosig said on Wednesday she’s going to need to pass on negative rates to a record number of retail depositors, and possibly even cut the rate on their accounts below the central bank’s benchmark of minus 0.75 per cent.
Sharing the pain of negative rates with retail depositors, once taboo, is fast becoming the “market standard” in Denmark, Ms Frosig said in an interview on Wednesday. She spoke after announcing cost cuts that will hit headcount, as life below zero makes it increasingly difficult to run a bank.
No other country has lived with negative rates as long as Denmark. At Jyske Bank A/S, the expectation is that the policy may last another eight years. It’s already led to dramatic adjustments in the banking world, with more lenders relying on other revenue streams besides traditional lending to stay profitable. Banks that have mortgage units are the lucky ones, as borrowers respond to falling rates by refinancing, incurring fees in the process.
“If you’d asked me five years ago whether we would have negative rates on deposits in Denmark, I wouldn’t have been able to imagine reaching that point,” Ms Frosig said. Now, she says she’s “stopped guaranteeing anything.”