Euro Deposit Definition

What Is a Euro Deposit?

A euro deposit is a deposit of foreign funds into a bank that operates within the European banking system. These banks function on the consolidated European currency—the euro. When an external investor deposits foreign currency into one of these banks, they are effectively depositing in euros. By putting money into a European bank account, the account holder may expect to accrue interest at the floating interest rate determined by the European Central Bank (ECB).

Key Takeaways

  • Euro deposits are funds deposited in a European account.
  • These deposits allow foreign citizens to invest in euros, collecting on the interest rate set by the European Central Bank (ECB).
  • Rates offered by the ECB for reserves have been negative since 2014.
  • Big banks have started charging customers for euro deposits as a way to pass along the costs.

How a Euro Deposit Works

A euro deposit can be a method for a foreign citizen, or company, to protect their money if their home currency sharply loses value. Banks can stipulate minimums for these foreign deposits. European banks have historically paid customers generous interest rates for "parking" their money in these accounts. This practice encourages wealthy customers and large companies to keep a more considerable amount of money in these European accounts.

However, in 2014, the European Central Bank (ECB) lowered interest rates to below zero for the first time. The rate has steadily risen since then, now at its highest rate since 2008—at 3% of March 22, 2023.

The previous lower interest rate meant imposing negative interest rates on deposits. Many international banks deposit their funds in the ECB. When the ECB initiated negative interest rates, those foreign banks, in essence, began paying to park funds in the ECB. Since negative interest rates resulted in a loss of revenue for the banks, many opted to pass those costs on to their customers.

Special Considerations

Banks in the U.S., such as JPMorgan Chase and Bank of New York Mellon, started charging customers for euro deposits earlier in the past decade. In early 2017, the Swiss bank UBS began imposing a charge for deposits over one million euros.

UBS said the move reflected “the increasing costs seen across the industry of reinvesting cash from deposits in money and capital markets, the continued extraordinarily low (negative) interest rates in the euro area and increased liquidity regulations.” 

Many central banks around the world have lowered interest rates to below zero. Japan’s central bank, the Bank of Japan (BoJ), decided in 2016 to lower its interest rate to negative 0.1%, which is where it stands as of March 2023. Though Japanese banks were initially reluctant to pass the costs onto customers, many have imposed fees for larger customers to make up for shrinking profit margins. According to the Japanese bank, customers would not be charged without their consent, but the bank would refuse to allow further deposits if the customer refused to pay the fee.

Some banks have opted not to pass the costs of negative interest rates onto customers. Some have said they feared a backlash from customers, which could result in lost accounts.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. European Central Bank. "Key ECB Interest Rates."

  2. Nasdaq. "Eurocurrency Deposit."

  3. European Central Bank. "International Reserves."

  4. European Parliament. "What Are the Effects of the ECB's Negative Interest Rate Policy?," Page 3.

  5. HSBC Expat. "What is a Non-Resident Bank Account?"

  6. European Central Bank. "Key ECB Interest Rates."

  7. European Central Bank. "Going Negative: the ECB’s Experience."

  8. The Wall Street Journal. "Big Banks Start Charging Clients for Euro Deposits."

  9. S&P Global Market Intelligence. "USB Expects Outflows by Euro Deposit-Holders: CFO."

  10. The Financial Times. "UBS to Charge Private Clients for Large Euro Deposits."

  11. Trading Economics. "Japan Interest Rate, 10YR."

  12. Bank of Japan. "Statement of Monetary Policy," Page 1.

  13. International Monetary Fund. "Pushed Past the Limit? How Japanese Banks Reacted to Negative Interest Rates," Page 14.

  14. Bank of Japan. "Introduction of Quantitative and Qualitative Monetary Easing with a Negative Interest Rate," Pages 1, 5.

Open a New Bank Account
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.