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I do agree with you that most commentators freak out about the zero bound more than is justified. Especially given the fact that negative rates have existed in

I do agree with you that most commentators freak out about the zero bound more than is justified. Especially given the fact that negative rates have existed in Europe and Japan for a while without any major effects. But generally, banks are extremely discourages, both by regulation and convention, from charing negative interest rates on consumer accounts. The first bank that "burns" funds in your checking or savings account is going to get assailed by a pitchfork wielding mob. So you're forced to borrow deposits at zero, and lend negative, which is obviously unprofitable. Negative interest rates do create a game of hot potato, where banks continuously try to offload their consumer depositors on one another.

jcranmer 5y ago
> The first bank that "burns" funds in your checking or savings account is going to get assailed by a pitchfork wielding mob. I think some banks have already done this as a result of Europe's persistent negative rates. See this Bloomberg article for a citation: https://www.bloomberg.com/news/articles/2019-09-22/banks-just-changed-the-rules-of-the-negative-rate-game-for-danes https://www.bloomberg.com/news/articles/2019-09-22/banks-jus...
- wcoenen 5y ago
  The current approach seems to be negative rates on deposits over a certain amount. E.g. ING Belgium will have a -0.5% interest on deposits over 250K EUR starting next month[1]. Rabobank.be simply decided to close all accounts[2], which is another way to get rid of customer deposits while avoiding mobs. It will increase the pressure on the other banks who will receive those deposits though. [1] https://www.ing.be/en/retail/daily-banking/savings-accounts/interest-and-conditions https://www.ing.be/en/retail/daily-banking/savings-accounts/... [2] https://www.brusselstimes.com/news/business/174304/200000-belgians-look-for-a-new-bank-as-rabobank-shuts-down/ https://www.brusselstimes.com/news/business/174304/200000-be...

jcranmer 5y ago

> The first bank that "burns" funds in your checking or savings account is going to get assailed by a pitchfork wielding mob. I think some banks have already done this as a result of Europe's persistent negative rates. See this Bloomberg article for a citation: https://www.bloomberg.com/news/articles/2019-09-22/banks-just-changed-the-rules-of-the-negative-rate-game-for-danes https://www.bloomberg.com/news/articles/2019-09-22/banks-jus...

wcoenen 5y ago
The current approach seems to be negative rates on deposits over a certain amount. E.g. ING Belgium will have a -0.5% interest on deposits over 250K EUR starting next month[1]. Rabobank.be simply decided to close all accounts[2], which is another way to get rid of customer deposits while avoiding mobs. It will increase the pressure on the other banks who will receive those deposits though. [1] https://www.ing.be/en/retail/daily-banking/savings-accounts/interest-and-conditions https://www.ing.be/en/retail/daily-banking/savings-accounts/... [2] https://www.brusselstimes.com/news/business/174304/200000-belgians-look-for-a-new-bank-as-rabobank-shuts-down/ https://www.brusselstimes.com/news/business/174304/200000-be...