Negative rates do not stimulate lending for useful economic activity. They damage “good” banks by eviscerating their bread and butter business model, but help “bad” banks play the casino.
BIS says negative rates – or NIRP – are chiefly intended to drive down the exchange rate. The central banks of Switzerland, Denmark, and Japan openly admitted as much.
Professor Richard Werner, a bank expert at Oxford University, said the outcome is progressively ruinous for Germany’s 1,250 savings banks and cooperative lenders, which rely on deposits from savers and have intricate ties with local business.
These banks account for 90pc of lending to small firms (SMEs). They provide credit for much of the Mittelstand engineering and machine tool family firms.
Ambrose Evans-Pritchard Telegraph 13 October 2020