Saxo Bank offers facility to earn interest on uninvested cash

The bank introduces an interest rate of up to 4.06 per cent with no lock-in period or upper limit on the amount paid

Saxo customers can use an interest calculator to estimate the total interest received on their uninvested cash, depending on the deposit amount and currency. Bloomberg

Saxo Bank has introduced a new interest rate model that allows customers to earn interest income on their uninvested cash with no lock-in period or upper limit on the amount paid.

This comes as banks in the UAE continue to offer customers low savings yields despite consecutive base rate increases by the UAE Central Bank since last year.

With a competitive interest rate up to 4.06 per cent, clients of the Danish investment bank will now see their deposit interest rate increase to reflect when the Central Bank raises its interest rate.

The funds will remain available to withdraw or invest, while earning interest on a daily basis, Saxo Bank said.

“Our clients will get the market interest rate on their deposits with Saxo’s new model after the Central Bank of the UAE raises its interest rates,” Damian Hitchen, chief executive of Saxo Bank in the Middle East and North Africa, said.

“Saxo is here to get curious people invested in the world, and we hope with this, we make it easier for clients to stay invested regardless of the daily market movements, and more transparent when and why their rate changes.”

The UAE Central Bank increased its base rate for the overnight deposit facility by a quarter of a percentage point to 4.9 per cent, from 4.4 per cent, in March after the US Federal Reserve increased its policy rate by 25 basis points as it continues to fight inflation.

Most central banks in the GCC follow the Fed's policy rate moves due to their currencies being pegged to the US dollar. Kuwait is an exception in the six-member economic bloc as its dinar is linked to a basket of currencies.

While the cost of borrowing has risen in line with the rate increases, banks have been slower to pass on the benefits to savers.

Most local banks in the UAE have minimum salary and minimum balance requirements for their savings accounts.

For example, ADIB’s Ghina savings account offers an interest rate of up to 0.37 per cent but stipulates a minimum salary of Dh20,000 and minimum balance of Dh3,000.

An Emirates NBD savings account offers an annual return of 0.20 per cent while an HSBC savings account has an interest rate of 0.05 per cent.

UAE low-cost robo-advisory platform Sarwa unveiled a cash account with a 3 per cent annual interest rate in February.

Similarly, digital wealth manager StashAway raised the rate of return on its cash management portfolio to 4 per cent in February.

Saxo customers can use an interest calculator to estimate the total interest received on their uninvested cash depending on the deposit amount and currency, the investment bank said.

With this new model, the interest rate on clients’ deposits is updated on a daily basis based on market conditions, which means adjustments to Central Bank policy are reflected accordingly, it added.

“The deposit interest rate for retail investors has historically lagged behind market rates, but that is now a thing of the past,” Saxo Bank said.

“With the new interest model, Saxo’s clients get a more dynamic model that follows the market developments every single day.”

Customers do not have to tie up their funds to benefit from the new interest model offered by Saxo Bank. The interest received follows the market rate without binding client funds for a certain period.

The interest rate model applies to all deposits in USD, EUR, or GBP, it said.

However, Saxo Bank said that if the total balance does not exceed $10,000, no interest will be paid.

“For balance amounts above $100,000, you will receive the highest interest rate on the additional balance, with no upper limit or lock-in period on the deposit,” the bank said.