Banks introduce negative interest rates

03.10.2019 - 20:08
Banks introduce negative interest rates
For the first time ever, Faroese banks are using negative deposit rates

Banks have for centuries profited from interest rates by paying to borrow money from customers and lending this money out to others at a higher interest rate.

This procedure has now been turned on its head, as BankNordik and Suðuroyar Sparikassi have introduced negative deposit rates, and Betri Bank is expected to follow suit soon.

Negative interest rates mean that instead of receiving money on deposits in the form of interest, depositors must pay regularly to keep their money with the bank. 

A new environment

“There have been changes in the interest-rate environment across the financial world, and one of the consequences is increased expenses for banks when depositing money, which is why many banks are now having to introduce negative deposit rates,” says Turid Finnbogadóttir Arge, operations manager at BankNordik.

She adds that private bank customers are unlikely to feel a sting from the negative interest rates, as they will primarily affect large corporate clients.

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