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UPDATE 1-BTMU to charge negative rates on euro deposits, first Japan bank to do so
May 2, 2017 / 7:07 AM / 7 months ago

UPDATE 1-BTMU to charge negative rates on euro deposits, first Japan bank to do so

* BTMU to charge euro time deposits of some corporate clients

* Ultra-low rates in Europe, Japan squeezing bank margins

* BTMU says no plan to introduce negative deposit rate in Japan (Adds details, background)

By Taiga Uranaka

TOKYO, May 2 (Reuters) - Bank of Tokyo-Mitsubishi UFJ (BTMU) will start charging negative interest rates on euro deposits from dozens of its biggest European clients, a spokeswoman said, the first Japanese bank to take such a step amid the ultra-low rate environment.

Japanese banks, particularly smaller ones, have seen their lending margins shrink after central banks in Europe and Japan adopted negative interest rate policy to spur borrowing and spending.

Japanese lenders have been reluctant to pass on the costs to customers given potential public backlash, but some European banks including UBS have started charging fees on large accounts.

BTMU, the core unit of Mitsubishi UFJ Financial Group , is in talks with some of its biggest corporate clients about charging their euro-denominated time deposits shorter than 12 months, spokeswoman Kana Nagamitsu said on Tuesday.

The clients consist of “a couple of dozens” that make deposits at the bank’s London branch, home to BTMU’s biggest European clients. The bank will not start charging without clients’ consent.

The new rates will be applied to deposits beyond a certain amount set by the bank. If clients refuse to comply, BTMU will stop accepting their deposits above that amount, she said.

The bank decided to make the move now as it could no longer tolerate profits being further squeezed by the European Central Bank’s negative interest rate policy, first introduced in 2014.

The Bank of Japan also introduced the negative interest rate policy in February last year, but the BTMU spokeswoman said her bank has no plan to charge negative rates on deposits in Japan.

BTMU CEO Takashi Oyamada has said charging negative rates was too difficult for its Japanese clients to accept. (Editing by Randy Fabi)

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