The German overnight money market is showing increasing independence from the European Central Bank (ECB)'s interest rate policy. Although the ECB has gradually lowered its deposit rate from 4.00 per cent to 2.00 per cent since mid-2024, numerous financial institutions are maintaining high special conditions or continuously increasing their promotional rates. This development is leading to a historic differential between the highest overnight money rates and the ECB deposit rate.
Before the next ECB interest rate decision, the gap between the highest overnight money rate and the ECB deposit rate is 2.25 percentage points. This represents the highest level of this differential to date. The current top overnight money rate is 4.25 per cent per annum, which exceeds the level during the last ECB rate peak from September 2023 to June 2024, when the ECB rate was 4.00 per cent per annum.
Intensified Competition for Deposits
The intensity of competition in the overnight money segment has increased significantly, as data from the Barkow Consulting Deposit Monitor shows. At the end of May, only one provider was leading with an interest rate of over four per cent; this number has since grown to six institutions. The previously leading offer is currently ranked fourth.
- —77 institutions currently offer a promotional rate above the ECB deposit rate, a value not reached since the last ECB rate step in June 2026.
- —In recent days, several institutions have further increased their terms and conditions.
- —Competition is intensifying, although from a bank's perspective, the current price war is difficult to justify economically in the short term.
Despite this situation, current indicators suggest that competition will not abate, but rather gain momentum. The question of reaching the 4.5 per cent mark in the overnight money rate sector is becoming increasingly relevant against this background. Given recent market developments, such a step appears entirely conceivable.
Market Transparency as a Basis for Interest Rate Strategies
The record-high differential between the top rate and the ECB rate illustrates the profound changes in the competitive dynamics of the deposit business. A precise classification of interest rate strategies, competitive movements, and market trends requires comprehensive and up-to-date insight into market events, as provided by the Barkow Consulting Deposit Monitor.
