Bank of Ireland becomes first domestic bank to charge for deposits

But it won't affect the average Joe...

Bank of Ireland becomes first domestic bank to charge for deposits

A Bank of Ireland branch in Inchicore, Dublin | Photocall file photo

Bank of Ireland is set to become the first major domestic retail bank to charge its business customers for large deposits in a move that won't mean much to the average account holder but does set a noteworthy precedent in Ireland.

According to the Irish Times, the financial institution – which is 14% State-owned – has informed its corporate and institutional customers that, from October, it will apply a negative interest rate of 0.1% for deposits of €10m or more from October.

Ulster Bank, which is owned by the Royal Bank of Scotland, is already charging negative interest rates for some large deposits in its Irish operation.

AIB and Permanent TSB, both of which are majority-owned by the taxpayer, say they’ve no plans to begin charging negative rates.

Bank of Ireland's move follows similar developments in Germany, Switzerland, Scandinavia and Japan and reflects the fact that central banks are now charging retail banks to hold large deposits in an effort to encourage them to lend more into their economies.

The ECB introduced a negative rate of 0.4% rate for large short-term bank deposits last March.

Some banks and large cash-heavy companies such as insurance companies have explored storing cash themselves rather than leaving it with central banks.

A Bank of Ireland spokesperson said in a statement:

“We keep all our rates under review."