Depositors and Negative Rates: Evidence From Transaction Data

Co-authors: Aggie van Huisseling (ABN AMRO), Jeannine van Reeken-van Wee (ABN AMRO, VU Amsterdam)

We study depositors’ reaction to negative rates on their bank accounts, exploiting the fact that in 2020 most Dutch banks introduced negative rates on depositors’ balances above a time-varying threshold. Using the universe of transactions made by the clients of one of the largest banks, we document that depositors reduced their excess balances between 30 and 60 per cent after the announcement of a new threshold. Initially, depositors mainly split their savings across multiple banks. As thresholds at all banks became lower, depositors increased financial investment through brokers and expenditure. The role of cash withdrawals is negligible.