July 21, 2024

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The first financial institution to reduce savings compensation after the European Central Bank’s interest rate cut

The first financial institution to reduce savings compensation after the European Central Bank’s interest rate cut

Trade Republic is the first financial institution to respond to the interest rate cut by the European Central Bank (ECB). The German broker reduces the compensation that clients receive for the capital they do not invest.

In the news: Starting June 12, Trade Republic clients will receive 3.75 percent interest on the first €50,000 they park with the broker. Until then, the fee is 4 percent.

  • Trade Republic is therefore the first financial institution to respond to the interest rate cut by the European Central Bank. This led to a reduction in the deposit interest rate – the compensation that banks receive for the capital they deposit with the monetary institution – by about 25 basis points to 3.75%. It is the first interest rate cut since 2019.
  • Trade Republic says it strives to “pass on the ECB interest rate cap to its clients.” We think it is unlikely that the German player will soon have to cut this savings allowance again. The central bank announced that this interest rate cut does not open the door to a series of interest rate cuts.

clarification: Will traditional banks follow suit?

  • Traditional players are likely not to immediately respond to the central bank’s interest rate decision to reduce savings fees. We owe this in part to the one-year government voucher, or van Petegem voucher, which expires in September. After that, at least 22 billion euros will be released. It is not appropriate to reduce savings rates at a time like this.
  • In addition, financial institutions have received a great deal of criticism in recent years because savings rates have remained relatively low compared to the interest rates adopted by the European Central Bank. They therefore risk damaging their reputation if they immediately respond to interest rate cuts by reducing savings fees.
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