Sunday, November 22, 2015

"Swiss bank will go where no retail lender has gone before"

"...will begin applying negative interest rates on individual clients."
The Alternative Bank Schweiz (ABS) caused shockwaves with a letter sent to all clients in mid-October informing them that it would begin imposing interest charges on deposits in 2016.
For current accounts, the bank said it would impose a -0.125-percent rate, while slapping a -0.75-percent rate on client deposits higher than 100,000 Swiss francs ($98,650, 92,420 euros).
So far individual depositors have been shielded from the burn of decisions by several central banks, including Switzerland's, to introduce negative interest rates to light a flame under growth or ward off unwanted currency investors.
ABS, which grew out of the ideals the 1960's protest movement, justified the unprecedented development by saying it would provide manoeuvering room for financing "meaningful projects".
The move did not go unnoticed in Swiss financial circles as banks in the wealthy Alpine nation search for ways to deal with the negative rates imposed on them by the central bank in January.
"This decision on negative rates is costing us a lot of money -- pretty much the equivalent of our entire annual profit last year," ABS chief Martin Rohner told AFP.
The Swiss central bank introduced a negative deposit rate in January after it abruptly abandoned its three-year effort to hold down the franc's exchange rate to protect exports.
The -0.75 percent rate is meant to dissuade foreign investors buying and holding Swiss francs as a safe haven investment, which had been putting upward pressure on the currency.

4 comments:

edutcher said...

Too bad it didn't do that to the Krauts.

bagoh20 said...
This comment has been removed by the author.
bagoh20 said...

At the risk (or hope) of being professorial, (hahaha), it's no different than lowering the interest rate paid any other time, e.g., from 1.00 to 0.25. You're either losing to inflation or you're not. You were already losing money at +1.00. You're just losing a little more. The negative sign is almost meaningless, yet extremely powerful advertising.

Methadras said...

And this is how they will steal your money and make you like it. What is funny is that the Swiss up-valued the the Swiss Franc last year by, I believe it was, 30%. Literally that was like giving everyone in the country, a raise. Now they are walked that back by .125%, but people will still not like it. Once you give something, good luck taking it back.