Deutsche Bank AG Chief Financial Officer James von Moltke said the European Central Bank was burdening banks with the costs of monetary policy after it decided to scrap interest payments on minimum reserves.
(Bloomberg) — Deutsche Bank AG Chief Financial Officer James von Moltke said the European Central Bank was burdening banks with the costs of monetary policy after it decided to scrap interest payments on minimum reserves.
The ECB on Thursday announced it will stop paying banks for the money they are required to keep at the institution, a shift that will cost lenders in the region about $6 billion, based on the latest data. Deutsche Bank will lose about 200 million euros ($221 million) in revenue annually, von Moltke estimated.
The ECB’s move represents a “cost transfer of monetary policy, again, to the banking industry,” he said on a call with fixed-income analysts Friday. “So we’re disappointed and somewhat surprised by the decision.”
The comments underscore the persistent tensions between the ECB and the commercial banks it oversees, and which for years had to contend with negative interest rates that undermined their bread-and-butter business of lending. Nine rate increases in the span of just one year have ended that and handed banks large windfall profits, some of which they now stand to lose again.
Deutsche Bank holds about 5.5 billion euros in reserves at the ECB, on which the central bank was paying 3.5% most recently. For this year, it will lose about 60 million euros in revenue because the ECB’s decision will only apply through the final four months, von Moltke said.
The ECB’s decision came after Deutsche Bank on Thursday increased its full-year revenue outlook from about 28.5 billion euros to about 29 billion euros. Other lenders, too, have raised their outlook to reflect the impact of rising interest rates.
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