Bank savers feel sting from negative interest rates

by
Matthew Allen
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The Swiss franc is in such high demand that the central bank is imposing charges on stockpilers. (© Keystone / Gaetan Bally)

Swiss savers are being made to pay for global demand for the franc. The number of bank customers being charged negative interest rates on their deposits is on the rise – and shows no sign of reversing.

The problem for domestic savers stems from the popularity of the Swiss currency. Amid economic uncertainty worldwide and a paucity of return on many investments, people have taken to dumping their assets in the solid franc. They may not make much money, but they won’t lose anything either.

That’s until the Swiss National Bank (SNB) introduced negative interest rates in 2015 – literally charging domestic banks to deposit money (above a certain threshold) at the central bank.

This policy cost high street banks some CHF2 billion ($2 billion) last year. They have had enough and are passing on the charges to certain clients who hoard their assets in francs.

Rising numbers

Banks started off by charging millionaires, but it appears that an increasing number of customers are feeling the pain. Zurich Cantonal Bank (ZKB) told the Tages Anzeiger newspaper that the number of people being charged negative interest rates has increased from around 600 in 2015 to upwards of 2,500 now.

ZKB is the largest of Switzerland’s cantonal-owned banks with around a million customers. It says it has no specific threshold at which it passes on negative interest rates. This means it’s not just the super-wealthy who face the deposit fees – it’s more a question of how long people have banked there and what type of investments they have.

A long-standing client with a mortgage loan and pension pot at ZKB might not be charged anything at all on their savings, even if it amounts to a million francs or more. But a new client obviously spreading their wealth around several banks to avoid negative interest might have their account charged from the very first franc. Anecdotal evidence suggests that other banks might have a similar policy.

ZKB is not the only bank that passes on negative interest ratesexternal link. According to price comparison group Moneyland, many banks set a thresholdexternal link above which they start charging individuals and in some cases companies. These include other cantonal banks, PostFinance – the financial unit of the Swiss Post Office – online bank Swissquote, UBS and Credit Suisse.

Lowering the bar

In some cases, the bar is being lowered to include more customers. In November, PostFinance said it would start selectively charging negative interest on accounts of above CHF250,000, as opposed to its previous limit of CHF500,000.

“For customers who only park liquidity with us, we now set the threshold at CHF250,000. For those who actively cooperate with us and use a wide range of our products and services, the threshold of CHF500,000 continues to apply,” it told Swiss public broadcaster SRFexternal link (in German).

And there are indications that the pain may get worse. In November, the SNB said the -0.75% interest rates could go even lower.