A warning was issued by the CEOs of Germany's two largest listed banks following reports on European Central Bank (ECB) interest rate cut.
They claim that such a move would only have minimal benefits to the economy while greatly impacting savers and the financial system. ECB's interest rate cut is expected to be part of a stimulus package being proposed at the upcoming ECB policy meeting.
According to Deutsche Bank CEO Christian Sewing, a rate cut would only push asset prices up while further burdening savers. He added that their customers said that if credit were 0.10 percentage points cheaper, they would make no additional investments.
Sewing pointed out that those who are indebted or have assets investments will benefit from lower rates but the majority will not, further creating a divide in the society. He also argued that the financial system will be ruined by low rates over the long term.
Commerzbank CEO Martin Zielke agreed with Sewing and said "I also don't consider this a sustainable, responsible policy."
Complaints have been made in the past by banks in Germany and across Europe over an ECB policy that requires them to pay to store their cash at the central bank, which affected their profits. A total of 2.4 billion euros or $2.7 billion were paid by German banks to hold cash at the central bank in 2018.
The chairman and CEO of BlackRock claimed that people in Germany and France still look at bank accounts as the best place to keep their money despite very low interest rates. He also argued that the ECB is wrong to encourage people to place money in stock markets and property as alternatives and called the move as financial craziness.
In a statement in July, the bank said: "The Governing Council expects the key ECB interest rates to remain at their present or lower levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to its aim over the medium term."
