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Press Release from 2021-06-28 / Group

KfW reduces borrowing costs by passing negative interest on to borrowers

  • Reduction will be passed on under promotional programmes on-lent through banks from 1 July 2021
  • Final borrowers will benefit from significant interest reductions
  • This will allow interest rates to be more strongly differentiated again by promotional objectives such as digitalisation and climate action
  • Result of a joint effort by KfW and financing partners

From 1 July 2021 KfW will be able to pass on negative interest rates to its financing partners in its on-lending promotional business with private customers and enterprises. To enable this, KfW and the savings banks, the cooperative banking sector, private banks and promotional institutions of the federal states had to make extensive changes to their IT systems.

KfW funds its promotional business by issuing bonds in the international capital markets, which currently earns low to negative interest in the current low-interest environment. Passing this advantage on leads to negative funding rates for on-lending banks and, thus, significantly lower interest rates than before under the promotional programmes for start-ups, businesses, private households and municipal and social enterprises. A binding system of terms, conditions and margins between KfW and commercial banks ensures that KfW’s funding advantage is passed on. The interest rate for ultimate borrowers will decrease significantly after it has been passed on but will remain positive. Now that negative interest rates can be passed on, KfW gains new scope for particularly low rates which it will use to even more intensely promote investment in important fields of the future such as digitalisation or climate action.

KfW already introduced negative rates in its direct lending business with municipalities, promotional institutions of the federal states and leasing companies at the beginning of the year. Since 1 February 2021 it has also been possible to pass on a negative interest rate under individual financing business for enterprises. The changeover now completed for promotional programmes on-lent through banks was suspended for a few months in favour of the coronavirus assistance jointly provided by KfW and the banking industry.

Dr Günther Bräunig, Chief Executive Officer of KfW: “After the KfW coronavirus assistance, being able to pass on negative interest rates under our promotional programmes is a further milestone in the cooperation with our financing partners. It makes our promotional loans more attractive, enables the interest structure to be differentiated in accordance with our strategic promotional objectives and thereby supports important future investments in climate action and digitalisation, sustainability and innovation.”


Portrait Wolfram Schweickhardt