Philip O’Sullivan, chief economist at Investec Ireland, said charging for large deposits will affect a small number of big corporate customers who are unlikely to be Irish-based, when banks elsewhere are starting to charge customers for their deposits.
The effect on the State —which moves millions of euro in short-term deposits through the bank — will likely be “absolutely minimal”, the economist said.
The move appears to be designed to protect the Bank of Ireland from a potential influx of new short-term deposits from outside the country, which would not benefit the bank. The State owns 14% of the bank.
“It is a canny move”, said Mr O’Sullivan for a bank which at the end of June held €11.6bn in corporate deposits. The lender does not discuss its pricing decisions of its products, a spokesman for Bank of Ireland said.
Allied Irish Bank does not charge its customers for deposits and has no current plans to start doing so, a spokeswoman for AIB said.
The ECB has taken a series of unprecedented steps in recent times, aimed at pushing up eurozone inflation toward its 2% target.
It is effectively boosting lending conditions in order to boost tepid economic growth across the eurozone.
The central bank now buys sovereign and corporate bonds on secondary markets. And in a significant move designed to attempt to spur banks and companies to lend and invest and not to hoard or park cash, the central bank has set its deposit interest rate at -0.4%.
Six of the world’s central banks have now introduced negative interest rates, including the Bank of Japan.
Last month, RBS — owner of NatWest and Ulster Bank — wrote to a million business customers in Britain to say it may have to impose charges on deposits if the Bank of England introduced negative interest rates.
Some large corporate clients who bank with RBS now face the prospect of paying to hold cash in their accounts from next week, a source close to the bank said, the first in Britain to charge negative interest rates on deposits.