Bank of Ireland earns €33m from negative rates on customer deposits

Executives expect this to rise to €80m this year as negative rates apply to more savers

Bank of Ireland is considering increasing the number of customers paying negative rates on their deposits, as it increasingly moves from paying customers to lodge their deposits to earning an income from them.

Already, €1 out of every €10 on deposit with the bank incurs a charge, and this is set to increase further.

Discussing the bank’s annual results on Monday, chief executive Francesca McDonagh said the bank was looking at lowering the deposits threshold at which it charges negative interest rates to €1 million.

At present, it is only high-net-worth individuals, corporates and credit unions that must pay for the bank to hold their deposits, with negative rates only levied on customers with €2.5 million or more on deposit.


Dropping this threshold to €1 million would substantially increase the number of Bank of Ireland customers who would find themselves paying a charge, of as much as 1 per cent, on their deposits.

While such a move would mean that the vast majority of the bank’s customers would still not be subject to charges, it does point to a trend where the threshold could continue to fall. And, given Ulster Bank’s impending exit from the market, there may be less pressure on the bank to have a competitive offering.

Other banks currently levying negative rates on deposits at a lower level than Bank of Ireland. Ulster Bank, for example, began charging negative rates last July on savings more than €1 million held by business customers, credit unions and other institutional clients. AIB has been charging negative rates to many businesses with more than €3 million on deposit, but is expected to cut this to €1 million also.


Bank of Ireland has continued to benefit from an increased appetite for saving during the Covid-19 crisis. Deposits rose by €5 billion, or by 6 per cent, to €89 billion in 2020.

Irish retail deposits overall rose by €7 billion to €59 billion, “reflecting lower customer sentiment and increased propensity to save”. Of this, €36 billion, or 61 per cent of the total, is held in current accounts – up by €6 billion on 2019.

Bank of Ireland’s end-of-year results showed that deposits subject to negative rates more than trebled to €8.5 billion from €2.7 billion at the end of 2019. This means that 10 per cent of its deposit book is now earning income for the bank, and an increasing amount of income is being generated from this source.

According to the results, income from these negative charges rose to €33 million in 2020, up by 73 per cent from €19 million in 2019.

Speaking to analysts on Monday morning, group chief financial officer Myles O’Grady said he expects that negative rates will apply to about €15 billion of the bank’s deposit book by the end of this year, bringing income from such deposits up to about €80 million. This would mean that about 17 per cent, or close to €1 out of every €5 on deposit, would be subject to a negative rate.

Fiona Reddan

Fiona Reddan

Fiona Reddan is a writer specialising in personal finance and is the Home & Design Editor of The Irish Times