GER: Negative Interest on Bank Deposits

Mar 14, 2025 Benn-Ibler Rechtsanwälte

In the past, customers at German banks had to pay interest for funds they kept in their bank accounts. Was this lawful? The German Federal Court of Justice (Bundesgerichtshof, hereinafter BGH) has now clarified in a landmark ruling: No, actually not.

In the case at hand, several German banks had been sued by a registered consumer protection organisation. In the past, these banks had charged negative interest (so-called custody fees) on savings, call money, and current accounts with balances above a certain amount because of the low-interest rate policy of the European Central Bank (ECB). In 2014, the ECB initially cut the deposit rate below 0.00 per cent, which meant that banks had to pay penalty interest for depositing their money with the ECB. The banks then passed these costs on to their customers.

The BGH has now partially ruled in favour of the consumer association.

Negative interest rates on bank deposits are inadmissible for savings and call money accounts. The purpose of savings accounts for customers is to build up assets over the medium to long term and to protect these against inflation by paying interest. The imposition of a deposit or custody fee, contrary to the principles of fairness and good faith, alters the character of a savings contract, since such a fee (dependent on the terms), is incompatible with the preservation of capital, which is the entire purpose of savings contracts. The imposition of custody fees reduces the amount of savings deposited in savings contracts, which is contrary to the purpose of the contract, namely ‘saving’ money.

However, current accounts are different. With current accounts, it is important for customers to be able to access their funds at any time. According to the BGH, the element of safe custody for daily use is therefore much more important than in the case of savings and call money accounts. Taken as a whole, these aspects justify considering the safekeeping of current account balances as the main service provided by the bank under the current account agreement and charging a custody fee or negative interest.

However, the BGH went on to say that the custody fee clauses in the current account contract in the case at hand were not transparent and therefore invalid. They were not specific enough regarding the amount of the custody fee, which means that consumers are unable to adequately assess any financial burden associated with their account. The clauses were not providing any precise information on the balance to which the custody fee referred.

Press release no. 026/2025 on the decisions of the BGH XI ZR 61/23, XI ZR 65/23, XI ZR 161/23 and XI ZR 183/23 (4 February 2025)