Europe’s Banks Eye Breaking Last Taboo With Negative Interest Rates

Five years after Mario Draghi turned the world of European banking upside down, lenders are considering breaking a last taboo: Negative interest rates for the masses.

Banks have long tried to pass on the cost of negative rates to corporations and wealthy individuals, but they’ve shied away from making regular folks pay to have money in the bank. Yet after Draghi, the European Central Bank’s president, signaled that rates could go even lower, executives at Banco Sabadell SA and Commerzbank AG are saying they can’t rule out charging retail clients for deposits. Some bankers are even more sanguine in private.

“With a change of paradigm like the one we’re experiencing, you could say that it could be contemplated,” Jaime Guardiola, Sabadell’s chief executive officer, said of negative rates for retail clients. “There’s still some margin for error before this happens, but it could be envisioned.”

The question is, who will go first? Banks fear that whoever breaks that last taboo will suffer reputational damage and a large-scale client exodus. In a sign of just how contentious the issue is, particularly in a country of savers like Germany, the issue of negative rates on deposits has exploded onto the front pages of the country’s largest tabloid, and at least one top politician is calling for a ban.

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