Swiss central bank adjusts interest rates on sight deposits
The Swiss National Bank (SNB) is making various adjustments to the interest rate on so-called sight deposits. This does not change the monetary policy orientation, the SNB emphasized in a statement on Monday.
Specifically, the SNB is reducing the factor for the limits that is used for the graduated interest rate on sight deposits. This will be reduced from 28 to 25 at the beginning of December.
The SNB key interest rate applies to sight deposits up to this limit, it said. Demand deposits above the limit bear interest at the SNB key interest rate less an interest discount of 0.5 percentage points. According to the SNB, the basis for calculating the limits remains unchanged.
In addition, sight deposits that are held to meet minimum reserves will no longer earn interest, the communiqué continues.
The SNB emphasised that the adjustments will not change the current monetary policy orientation. According to the SNB, the adjustments are intended to ensure that monetary policy continues to be implemented effectively. And they are intended to reduce the National Bank’s interest costs.
The largest item in the total sight deposits at the National Bank is the current accounts of domestic banks. These sight accounts form the basis for the National Bank’s control of liquidity on the Swiss franc money market. The National Bank influences the interest rate on the money market by calculating interest on sight deposits.
The National Bank generally checks the interest rate on sight deposits regularly and makes adjustments if necessary. There were major changes in this regard when we said goodbye to negative interest rates. At that time, the SNB introduced a “reverse allowance” for banks.
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