UniCredit may become the first big eurozone bank to pass on negative interest rates onto big depositors

Paris (AFP) - Italian giant UniCredit is readying to pass on negative interest rates to clients with deposits of over 100,000 euros as soon as next year, its chief executive said Wednesday, which would make it the first big eurozone bank to do so.

“More and more these negative rates are going to be passed on to clients with large deposits,” Jean-Pierre Mustier said on French TV channel BFM Business.

Europe’s commercial banks have been labouring under ultra-low and even negative official interest rates in recent years as the European Central Bank tries to boost the economy with cheap cash.

Earlier this month the ECB pushed its deposit rate to minus 0.5 percent, which means commercial banks are paying the central bank to hold their reserves.

Although negative rates have squeezed banks’ profitability so far only a few small eurozone banks have directly passed on the cost depositors, and then only to large clients.

Mustier indicated UniCredit would take a similar approach.

“We must protect the most vulnerable bank clients, those covered by deposit insurance, and then on a case-by-case basis we could consider passing negative rates onto large companies or to certain big clients while offering them a certain number of alternatives,” said Mustier.

In addition to being Italy’s top bank, UniCredit is also the leading bank in Austria and has a large market share in several eastern European countries.

Mustier said that banks were being forced to take the logic of negative rates to its conclusion and pass them on to clients.

“Negative interest rates shouldn’t stop at banks’ balance sheets,” he said.

Eurozone banks have also shed thousands of jobs as they try to adapt to ultralow interest rates and growing digitalisation, including UniCredit which as cut 14,000 positions in the past three years.