ABSTRACT
The use of negative interest rates in the banking business is currently one of the most debated subjects within the EU banking sector. Although negative interest rates were initially introduced exclusively as an unconventional monetary policy tool, certain banks in EU member states started to implement such rates in contracts involving retail and corporate deposits. This means that in such cases instead of receiving an income on cash deposits, the depositor shall be obliged to pay a fee to the bank for providing a service of ‘safekeeping’ of funds. Negative interest, therefore, functions on the reverse logic in comparison to the regular interest.
The purpose of this chapter is to analyse whether the use of negative interest rates in banking cash deposit contracts would be permissible under Croatian contract law: does the current legal framework support the introduction of negative interest at all or does this depend on the type of the deposit contract? Furthermore, can such a contract be considered as an innominate banking cash deposit contract falling outside of the scope of the banking cash deposit contract legal framework?
