July 6, 2015
While all eyes were on Greece this weekend, one of the largest banks in Lithuania quietly posted an awkward announcement to its customers.
Interest rates are now negative.
So negative, in fact, that the bank actually has to pay interest to some of its borrowers.
And the bank was totally unprepared for this.
Apparently some meaningful percentage of the bank’s loans are on variable interest.
This means that when prevailing interest rates go up or down, the interest rate on loan goes up or down.
SEB never thought in a million years that interest rates would actually be negative.
So many of the loans don’t actually have any provisions in place which would protect the bank in the event that interest rates turn negative.
As the bank rather delicately explained to its customers, “Negative interest rates are a new and unique situation” that are “raising a number…
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