Swiss Banks Begin Charging Clients as Negative Rates Kick In
(Bloomberg) — A growing number of Swiss banks are charging customers to hold Swiss francs after the country’s central bank decided to collect interest on the lenders’ own deposits.
Credit Suisse Group AG said it plans to charge institutional customers and large corporate clients interest to hold some assets. UBS Group AG is considering similar action. Neither of Switzerland’s two big banks disclosed the fees.
Geneva’s oldest bank, Cie. Lombard, Odier SCA, said it will start charging Thursday for cash accounts it doesn’t manage and that have a balance of more than 100,000 Swiss francs ($116,000). It said the rate would be 0.75 percent, the same as the charge on sight deposits imposed by the Swiss National Bank last week. Zuercher Kantonalbank, Switzerland’s biggest state- owned cantonal bank, said Thursday that it will also charge 0.75 percent on some large deposits and may change terms for savings and other accounts.
The SNB stunned currency markets a week ago by ditching its three-year-old cap on the franc and further slashing rates on sight deposits, the cash-like holdings commercial banks keep with the SNB. Since then, other central banks have also loosened the tap on money. The Bank of Canada lowered its rate on overnight loans Wednesday in response to the plunge in oil prices. On Monday, Denmark delivered a surprise interest-rate cut to restrain the krone. The European Central Bank has kept markets in suspense for months about details of a bond-buying program it is expected to announce Thursday to combat low inflation and shore up the economy.
‘Watching Closely’
Already, some banks began charging customers for depositing large amounts of euros after the ECB switched to negative deposit rates in June. They included Credit Suisse, Bank of New York Mellon Corp., JPMorgan Chase & Co. and Commerzbank AG. More recently, RBC Investor Services, the depositary unit of Royal Bank of Canada, said Thursday that it plans to start charging institutional clients in the euro region for holding their cash.
“We have not currently introduced negative rates but are watching the situation very closely,” Simon Roth, a Zurich- based spokesman for Banque Pictet & Cie SA, said in an e-mail Wednesday. Lombard Odier managed 156 billion francs for clients at the end of of June, while Pictet managed 319 billion francs. Both banks hold additional assets and are Switzerland’s biggest closely held banks.
Julius Baer Group Ltd., Switzerland’s third-largest wealth manager, declined to comment. Two other Swiss private banks were watching the situation closely. Rahn & Bodmer Banquiers said it had not yet reached a decision on whether to charge negative interest rates. EFG International AG said it has no plans to introduce fees.
The SNB is trying to head off deflation and make the Swiss franc less appealing to investors, who piled into the currency in a search for relative safety during Europe’s debt crisis. The strong franc is hurting the export-driven economy by making Swiss goods more expensive for foreign buyers.
“Many clients will prefer to pay a premium for the confidence that their assets are safely held with the SNB in Swiss francs rather than take counter-party or foreign exchange risk elsewhere,” Lombard Odier said in an e-mailed statement Wednesday. It is encouraging clients to shift investments out of cash.
–With assistance from Jan Schwalbe and Jan-Henrik Förster in Zurich and Charles Penty in Madrid.
To contact the reporter on this story: Hugo Miller in Geneva at hugomiller@bloomberg.net To contact the editors responsible for this story: Heather Smith at hsmith26@bloomberg.net Cindy Roberts, Steve Bailey
