The Federal Court of Justice (BGH) has declared the imposition of negative interest rates on savings and day-to-day accounts to be inadmissible. Banks and savings banks that have charged so-called custody fees could now face repayment demands.

The background of the judgment is lawsuits by several consumer centers against four financial institutions. They had imposed negative interest rates on deposits during the low-interest phase to pass on their own costs. The BGH has now decided that such a practice contradicts the purpose of the contract. "Savings should not shrink but remain intact," stated presiding judge Jürgen Ellenberger in Karlsruhe.

The banks had claimed that they themselves had to pay negative interest rates to the European Central Bank (ECB). Since 2014, the ECB has imposed penalty interest rates of up to 0.5 percent on commercial banks' deposits. At its peak, in May 2022, at least 455 banks in Germany charged custody fees - sometimes starting from a balance of 5,000 euros. In July 2022, the ECB abolished the negative interest rates, leading banks to also withdraw their fees.

Whether affected bank customers can now reclaim the negative interest they paid was left open by the BGH. Consumer protection agencies cannot sue for this in the context of class actions – affected individuals must take action themselves. The statute of limitations could play a decisive role in this.

A survey by the comparison portal Verivox revealed that 13 percent of respondents had paid negative interest. 88 percent of them expressed the intention to reclaim the money from their bank.

For the banking industry, the judgment is a setback as it significantly complicates future attempts to introduce negative interest rates. Consumer advocates see it as an important step for more transparency and customer protection during low-interest phases.