Last Tuesday, Jyske Bank, Denmark’s third-largest lender announced that it will start charging affluent customers for deposits instead of paying interest. This comes less than two weeks after launching the world’s first negative interest-rate mortgage, with the rate of 0.5%. According to the Financial Times, customers with deposits of more than 7.5 million Danish krone (£900,000) will receive a negative interest rate of 0.6% a year to store their money, equating to a loss of £5,350.
This unconventional decision taken by Jyske Bank is the latest in a series of moves undertaken from Denmark’s central banks to revive demand and boost consumption. Currently, the bank is facing an increase in deposit surplus from personal clients, resulting in large expenses. It’s also worth noting that Denmark’s central bank has set negative interest rates since 2012, which is in fact longer than any other country.
Impact on Businesses and Law firms
Despite the recent move from Jyske Bank, other lenders have been wary of imposing negative rates on other retail customers because it could lead to cash hoarding. Having said that, Jyske Bank’s purpose for both lending, as well as deposits, is to directly encourage consumers to spend rather than save.
However, Jyske’s decision has led to some disbelief on the part of consumers. This has led to the Danish Financial Supervisory Authority to move in and monitor whether banks are providing ‘bad’ advice by pushing its customers into investment products with excessive fees in an attempt to avoid negative rates.
Corporate lawyers specialising in global investment funds may be needed to advise Jyske’s customers on a range of investment funds associated with receiving capital from Jyske Bank, such as from private equity funds, strategy funds, hedge funds and fund structured products. Clients may also receive advice on fund structuring and investment reviews.
By Sairah Saeed