Update negative interest rates for companies and municipalities

In the autumn of 2017, we informed you about the topic “negative interest rates”. Here we have the following update:

In the meantime, many companies, municipalities and cities have asked the banks to book the negative interest rates on the credit accounts and also to carry out the future interest payments taking into account the correct transfer of the negative interest rates. In the impression of already pending or imminent further legal proceedings, banks have also agreed to enter into extra-judicial negotiations and already have concrete proposals for solutions.

For foreign currency loans, the corresponding indicators (Libor) for negative interest rates have reached negative levels starting with March 2015. Therefore, a statute of limitations of partial claims is already in the room, unless negotiations are taken and the bank issues a statute of limitations. The limitation period is always 3 years.

In the context of out-of-court settlement of claims, banks are therefore also called upon to initially waive the statute of limitations in respect of the claims so that there is sufficient time to negotiate solutions. This approach is also supported by the Austrian Association of Towns (“Österreichischer Städtebund”).

It is therefore necessary to act swiftly. In order to invite the banks to talks and thus to pass prescriptive waivers, it is not yet necessary to calculate the exact claim for the recovery of interest. This step can be done later. The invitation to the bank by means of a lawyer’s letter to correctly calculate the interest can be formulated abstractly for the time being. Once this first step is taken, the community can not be accused of inaction. The Städtebund has indicated in a press release that in case of inaction a debate about the fulfillment of a criminal offense (infidelity) could be discussed.

If you are interested in assisting your municipality in correcting lending requirements, we ask for feedback below [email protected].

About The Author

Heinz Hofstaetter
Over 20 years of international experience in senior management positions in the areas of consulting, banking, finance, asset management, valuation and Real Assets.