ING Belgium has announced it will no longer pay interest from 1 July on savings accounts with a balance of more than €250,000, In addition, the bank will start to charge negative interest on balances of more than €500,000.
The reason for the move is the negative interest that banks have to pay when they are obliged by law to park any assets not being used for loans with the European Central Bank (ECB). Until now, clients were able to keep one million euros on their savings account without penalty, and in fact those accounts attracted a minimum interest of 0.11%.
Only accounts with more than two million euros attracted a negative interest – in effect, the client pays to keep their money in the bank instead of the more usual situation where the bank pays you.
In normal circumstances, banks were keen to attract savings at low interest rates which would then be used by the banks to lend at higher interest to other clients. But market conditions have since seen interest rates overall go down. Banks cannot earn as much as before on loans, so they are less keen to pay out interest on savings.
The latest move, then, simply means the thresholds have come down. From 1 July, balances up to €250,000 receive 0.11%; from €250,000 to €500,000 attracts 0% interest, and balances of more than €500,000 will now pay 0.5% penalty interest.
To be clear, each step attracts its own interest. A balance of €500,000 includes a sum of €250,000 at 0.11% and a further sum of €250,000 at 0%. And any amount over €500,000 attracts a penalty of 0.5%.
The latest change applies only to private clients. Business clients have received no interest for some time now, paying a penalty of 0.5% for balances over one million euros. From 1 July, that threshold too comes down to €250,000.
The bank said the changes would have no effect for 97% of their clients.
“Today, fewer than 2.5 percent of business customers and fewer than 0.5 percent of retail customers have a balance of more than 250,000 per account,” a spokesperson said.