A survey of Swiss companies commissioned by UBS bank concludes that negative interest rates are harming the wider economy.
Switzerland’s largest bank, UBS, asked 2,500 companies about the impact of negative interest rates. “Nearly two-thirds of respondents said that the cost…for the economy outweighed their benefits overall,” UBS said in a press releaseexternal link on Thursday.
The findings heap more pressure on the Swiss National Bank (SNB), which continues to defend its actions.However, companies are not particularly concerned about the effects of monetary policy on their own businesses. “Most companies are not directly affected by negative interest rates; only a minority pay negative interest rates on cash held in bank accounts.”
Moreover, ultra-low rates, which have been in place since 2015, help exporters by stopping the value of the franc from spiraling out of control and benefit firms taking out loans.
“What is remarkable, however, is that a majority of companies who generate over 50% of their business from exports believe that negative interest rates are harmful to the Swiss economy overall – especially because no end is in sight,” says UBS chief investment officer Daniel Kalt, a long-term critic of the SNB’s policy.
Concerns centre on the inability of pension and savings pots to grow from traditional interest-bearing investments. The Swiss property market is also in danger of over-heating as investors rush to put their money into bricks and mortar.
Speaking at a recent meeting of pension fund managers in Bern, SNB chairman Thomas Jordan defended the extraordinary monetary policy, arguing that the stabilisation of the franc is benefiting the economy as a whole. Jordan has also warned that interest rates may have to go even lower.
Commercial banks say they are bearing the brunt of the policy by having to pay around CHF2 billion ($2 billion) a year to park assets at the central bank. Some have started to pass on the pain to wealthy clients and corporate accounts.
PostFinance confirmed on Thursday that it had reduced the threshold for charging negative interest from CHF500,000 to CHF250,000 on certain accounts.
Vincent Taupin, CEO of Edmond de Rothschild private bank, told the Financial Timesexternal link that the industry faces a crisis as profitable investment opportunities decline. “The good old times where . . . any kind of money you raised, you could put it at the central bank and make at least 400 basis points out of it, those are behind us,” he said.