Central banks' rate cuts cascade down to Singapore banks' key deposit accounts

Singapore

SINGAPORE banks this week slashed several rates on their flagship deposit accounts, reflecting the weaker rate environment globally.

Such flagship deposit accounts usually come with tiered incentives where higher rates are earned for more transactions done with the bank. The transactions include depositing one's salary, spending on credit cards issued by the bank, and purchasing the bank's investment products.

But as benchmark rates track the recent rate cuts done by the US Federal Reserve amid souring economic conditions due to the virus outbreak, Singapore banks have duly brought down the interest rates starting from May.

Direct comparisons are difficult, given different conditions and tiers held in these accounts.

UOB's relatively drastic move has been to reduce rates across the board for deposits up to S$75,000.

From May 1, on UOB's flagship deposit account - the UOB One Account - the maximum effective interest rate that can be earned on deposits totalling S$75,000 has fallen to 1.8 per cent per annum (pa), down from the current 2.44 per cent pa. To earn the 1.8 per cent, the prevailing qualifying criteria continues to apply. This means account holders must have spent S$500 a month on their credit card, and credit at least S$2,000 of their monthly salary, or have three Giro debit transactions.

For customers on this deposit tier and who meet only the spending criteria - that is, they do not credit salary into the UOB One Account - the maximum interest will fall to 0.5 per cent pa, a third of the current rate of 1.5 per cent.

The bank has also reduced rates for every S$15,000 deposited, which is how UOB has tiered its deposit-rates structure. For instance, interest for the first S$15,000 in deposits will drop to 1.25 per cent pa from the current 1.85 per cent, for account holders who meet both the credit card spending and salary criteria. For the next S$15,000, rates will fall to 1.3 per cent, from the current 2 per cent.

"These are extraordinary times and in a declining interest rate environment, some changes will need to be made so that the UOB One Account can continue to be a simple and flexible savings account," UOB said in its notice to customers on April 1.

UOB attributed the rate revisions to the ongoing pandemic and the weakening global economy.

"Given the impact of slowing global growth and the Covid-19 outbreak, central banks across the world, including Asia, have cut their benchmark rates alongside the US Federal Reserve easing its monetary policy from July 2019. The Singapore Interbank rates have also been falling since June 2019, and are expected to stay low for an extended time," it said.

Over at DBS, customers earning interest on its flagship Multiplier account have to tick the boxes in terms of crediting income in the form of salary or dividends, as well as tally up the transaction value with the bank - that is, via credit card spending, home loan instalments, insurance premiums and investments. Customers then earn interest that is also tiered according to how much they have in the account.

From May 1, DBS will cut the various rates earned on the Multiplier account for the first S$25,000 deposited by customers who credit an income stream, and meets one transaction criterion.

For instance, for monthly transactions that amount to at least S$2,000 but fall below S$2,500, rates will fall to 1.4 per cent pa, down from the current 1.55 per cent. For transactions totalling at least S$30,000, rates will come down to 2 per cent from the current 2.08 per cent.

The bank's spokesperson said rates were adjusted based on "several factors, including interest rate environment, current market conditions, as well as impact to customers' overall interest rate earnings".

OCBC made a slightly different tweak from its peers, and actually raised rates tied to one big criterion: salary crediting. It has also lowered the thresholds to qualify for salary bonuses offered by its flagship 360 account, but slashed rates for other bonuses tied to the account.

For each qualifying criterion, OCBC has one rate that is applied for the first S$35,000 held in the account, and then a higher one for the next S$35,000.

For the first S$35,000, the interest rate of 1.2 per cent pa remains unchanged.

But from May 2, and for the next S$35,000, rates will be raised to 2.4 per cent, from the current 2 per cent.

To add, account holders will just have to credit at least S$1,800 of their salary - down from the current S$2,000 - to qualify for the salary bonus. OCBC's head of deposits Gregory Cher said this threshold was lowered to "support customers who are joining the workforce during this challenging economic climate".

However, the bank will cut maximum bonus interests attached to the credit card spending and "step up" criteria that reward customers for topping up their balances by at least S$500 versus the previous month - to 0.4 per cent, from the current 0.6 per cent.

Its "grow" bonus, eligible for account balances of at least S$200,000 and which is applied on the first S$70,000, will also come down to 0.8 per cent, from the current 1 per cent.

The bank will also remove an existing boost bonus, which currently offers 1 per cent on the increase in each account's daily balance from the previous month's.