AIB said on Monday afternoon that it would cease charging customers with at least €1 million on deposit for storing their money, days after the European Central Bank (ECB) abandoned its negative rates policy after eight years.
“AIB will cease applying negative interest rates to all affected accounts in August. All impacted customers will be communicated with confirming the effective date,” the bank said in a statement published on its website. An estimated €18 billion of AIB deposits are subject to the charge.
Bank of Ireland had announced within hours of the ECB decision last Thursday that it would stop charging negative rates.
In 2014, the ECB became the first big central bank to introduce a negative deposit rate policy, in an effort to push banks to lend more and boost inflation and economic activity.
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The ECB was charging banks minus 0.5 per cent for surplus deposits that they placed with it, before it moved last week to move the key rate to zero in an effort to tackle a recent spike in inflation.
Bank of Ireland and AIB had moved belatedly in recent years to widen the net of customers to whom they could pass on charges the ECB is applying to surplus cash placed with it. The pillar banks’ deposits exceeded loans by almost €50 billion as of March.
AIB had previously estimated that some €18 billion of its deposits would be subject to negative rates as of the middle of this year. The bank started applying charges on personal accounts holding more than €1 million in May, trailing Bank of Ireland by six months.
AIB applied a negative rate of minus 0.5 per cent on most affected accounts until recently, but moved it to minus 0.75 per cent in March. It charged a higher rate of minus 1.1 per cent to certain financial customers, including pension and investment funds and nonbank lenders.
AIB also clarified on Monday that it would not be changing its current variable or new fixed-rate mortgage rates as a result of the ECB also raising its main lending rate last week from 0 to 0.5 per cent.
Its rivals Permanent TSB and Bank of Ireland had signalled last Thursday that they would not be changing rates on such products.
Still, some 300,000 borrowers across the Irish mortgage sector with €25 billion outstanding on ECB-tracker loans will see their monthly payments increase automatically as a result of last week’s move.
AIB was forced last Friday to abandon a plan to move 70 of its branches into cashless locations, following political and public uproar over the move, led by Taoiseach Micheál Martin.
