September 11, 2019 / 6:10 PM / 6 days ago

Dutch parliament tells ECB's Draghi it opposes 'tiered' rates

FILE PHOTO: European Central Bank (ECB) President Mario Draghi holds a news conference in Frankfurt, Germany, January 24, 2019. REUTERS/Kai Pfaffenbach/File Photo

AMSTERDAM (Reuters) - Dutch parliament on Wednesday sent a formal letter to the European Central Bank underlining its opposition to a policy under consideration that lawmakers think is contrary to Dutch interests.

The letter, addressed directly to ECB President Mario Draghi as the bank’s governing council gathers for a policy meeting, ignores the convention that central banks should be free of political pressures.

The letter included a translation into English of a motion passed by Dutch parliament that says offering banks “tiered”, or preferentially high, interest rates on deposits held at the ECB would be unfair to pension funds that are currently forced to invest at negative rates.

The Dutch civil servants’ pension fund ABP, with 451 billion euros of assets under management, will be forced to cut pensions next year on current forecasts, an explosive political issue in the Netherlands.

Lawmaker Pieter Omtzigt, who authored the motion, said that tiering would effectively advantage southern Europeans, traditional bank savers, at the expense of Dutch retirees.

“The negative interest rates of the ECB disproportionately hit the Dutch pension funds,” he told Reuters.

“If on top of this, banks are partially compensated by tiering...but pension funds are not, then the ECB will further erode support for its very unconventional and risky policies” he said.

Tiering of the deposit rate is one of several policies under consideration by the ECB to stimulate the flagging European economy.

Reporting by Toby Sterling; Editing by Toby Chopra

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