WEST GERMAN BANKS SLOWLY CUTTING KEY SAVINGS RATES
West German commercial banks are
cautiously cutting key savings and lending rates, banking
sources said. The cuts follow nearly two months after the
Bundesbank reduced leading interest rates, far longer than the
usual interim period.
    A Deutsche Bank AG <DBKG.F> spokesman said it is cutting
leading savings rate for private customers on a regional basis
by 0.5 percentage points to two pct. Dresdner Bank AG <DRSD.F>
and Commerzbank AG <CBKG.F> have initiated similar moves. Bank
fuer Gemeinwirtschaft AG <BKFG.F> cut rates 0.5 pct generally.
    The delay was partly due to commercial banks' desire to
gauge customer reaction to a similar move by regional savings
banks.
    A fall in customer savings because of lower rates could
reduce cheap refinancing available to banks, forcing them to
draw down relatively expensive funds from other sources, one
economist at the German Banking Association said.
    But the volume of savings funds may not be substantially
undercut by lower savings rates because many customers are
parking funds in savings accounts in the hope they can reinvest
them at higher yields in the future, he said.
    He said this may conflict with Bundesbank aims to move more
funds from relatively short-term deposits to longer-dated
securities to reduce strong growth in its central bank money
supply aggregate.
    The aggregate showed annualized growth of a provisional 7.5
pct in February against the fourth quarter of last year,
unchanged from January. The growth rate was outside the
expanded target range of three to six pct.
    Few banks have so far reduced lending rates to private
customers, though lending rates for corporate customers are
beginning to decline.
 REUTER
