The eurozone’s policy of negative interest rates cost Irish banks and the government almost €33m in 18 months.
The hit arose from a decision by the European Central Bank (ECB) in June 2014 to begin charging lenders to park excess deposits with the currency block’s 19 central banks.
The Central Bank of Ireland earned €23m in interest from state deposits in 2014 and 2015, according to its annual reports, while commercial banks paid almost €10m to deposit their excess liquidity with Dame Street.
The bill is expected to increase substantially in 2016 after the ECB increased the charge for wholesale deposits to 0.4% in March, up from 0.1% when deposit rates first turned negative two years ago.
The policy, overturning the accepted practice of paying interest to attract deposits, is supposed to spark economic growth by incentivising banks to lend money to businesses instead of hoarding it.
While banks have for some time passed on the effects of the ECB’s policy to corporate and institutional clients, charging them interest on large deposits or refusing to take their money altogether, retail savers are now feeling the pinch.
Investment advisers report that their clients are being forced to pay interest on some bank deposits held through pension and other funds.