AIB to stop paying interest on many savings accounts and to start charging more firms to lodge money

AIB to stop paying interest on many savings accounts and to start charging more firms to lodge money

AIB is already charging negative interest rates to wealthy customers and larger businesses who have more than €3m on deposit.

AIB is to stop paying interest on a raft of everyday customer savings accounts and aims to make more of its wealthy and corporate customers pay to lodge money with it in a bid to stem its losses from rising deposit levels.

In a letter sent to customers, AIB said it will be cutting its gross interest rates on 13 savings and deposit accounts in January. Out of that number, 10 savings products will attract zero interest, albeit from existing minimal rates.

In the current low-interest-rate environment, banks — which are charged for holding deposited money — are losing money as deposit levels continue to rise. The ECB deposit rate stands at -0.5%.

“Globally, interest rates have been exceptionally low for some time in many countries, including our own,” AIB said in its letter. 

"Unfortunately, as a result, we have to lower the interest rates we offer on many of our deposit accounts from 12 January, 2021. In many cases the rate will be zero."

A spokesperson for the bank said: “AIB has successfully insulated 99% of our customers during a sustained period of European negative interest rates. We continue to do so, while keeping our pricing for large deposits under constant review.”

AIB is already charging negative interest rates to wealthy customers and larger businesses who have more than €3m on deposit, meaning these customers are basically paying the bank to hold their money rather than the other way around. 

However, the bank will look to widen that net at some point next year, by lowering the €3m threshold. While not confirmed, it is estimated that the €3m threshold will be lowered to €1m, bringing thousands more than the roughly 1,000 so far into negative rate territory.

A change in terms and conditions will also include micro-businesses in the negative rate plan.

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