Broker compensates negative interest rate

Asalam Alaikum

I am looking to invest with DEGIRO. DEGIRO due to Dutch regulation laws are not able to hold their clients’ cash funds themselves. Instead, they invest them in Money Market Funds or with a bank.

Both of these currently have negative interest rates and DEGIRO compensates all losses up to E2,500.
Is it permissible to use it since DEGIRO will be compensating the negative interest rate (so long as I limit my cash balance below E2,500)?

Unfortunately, there are no other brokers available to me that don’t lend out my shares other than DEGIRO.

JazakAllah Khair

1 Like

Wa alaykum salaam,

Do you mean that the DEGIRO will have to pay to keep their funds with the conventional bank or money markets?

As far as I understand (I also have an account with DEGIRO), a negative interest rate is taken from our saldo at DEGIRO up to E2500, because DEGIRO is obliged to keep this money in a flatex bank (this was a money market fund previously). DEGIRO pays this negative interest rate back to us in order for us not to lose any money in keeping our saldo at the flatex bank. This means that in some way we pay (negative) interest to the flatex bank and then afterwards receive this money back from DEGIRO. I also would appreciate your view on the permissibility of this although I am afraid there is no way to bypass this situation since keeping our saldo at the flatex bank is the only option at DEGIRO…

Yes, I believe so. They are essentially offsetting the amount that I would have lost in my uninvested cash balance due to the negative interest rates that the conventional bank and money market funds currently have.

So with the current negative interest rates, my uninvested cash balance would never change.
I wonder if it’s permissible or not since my cash balance essentially sees 0% interest but DEGIRO is paying the negative interest rate for me.

@Mufti_Faraz_Adam I’m also following this topic, do you maybe already have an answer to this? Many thanks in advance!

@Mufti_Faraz_Adam sorry to ask again, but I really would like to know if there is an answer to this question? JazaakAllah Khair.