For years, European banks were leery of passing on the ECB’s negative deposit rate to their clients for fears of deposit flight and other unintended consequences, in the process being forced to “eat” the difference and impacting their interest income.
Swiss lenders, many of them focused on wealth management, have to weigh the prospect of continuing to lose money on the cash deposits against imposing fees that could prompt some of their most valuable customers to jump ship.
However, after five years of NIRP, and with the ECB set to unleash even more negative rates in the immediate future, one bank finally took a stand earlier this summer when UBS announced plans to charge a negative interest rate on wealthy clients, those who deposit more than CHF 2 million with the largest Swiss bank.
And now, two months later, as rates fall ever more negative, Bloomberg reports that Credit Suisse also plans to impose charges on its wealthiest clients in order to spread the pain of negative interest rates.
Credit Suisse had warned this was coming:
“In Switzerland, we are considering measures on deposits to mitigate pressure of negative interest rates,” Tidjane Thiam, Credit Suisse CEO said during a discussion of the bank’s half-year results. And like UBS, the Credit Suisse levy would be “targeted on people . . . that measure their cash balances in millions.”
And now, according to a person with knowledge of the matter, Bloomberg reports that Credit Suisse expects to start charging for Swiss franc deposits after imposing a 0.4% fee on euro accounts of more than 1 million euros.
Whether such negative rates encourage savers to spend their money as central banks have been hoping all along, remains to be seen. In any case, one thing is certain: the unintended consequences of passing on the most destructive monetary policy onto end consumers and savers, will be dire and widespread, and could potentially result in the next financial crisis which, with some luck, will also be the last one.
For now, however, keep an eye on cryptocurrencies. The Swiss Franc has acted in sync with Bitcoin as a safe-haven:
But, with both Credit Suisse and UBS now charging, we wonder if that relationship will shift, because, last we checked, there was no cost, and no way to impose punitive rates, to keeps one’s savings in bitcoin and its peers, which should have obvious consequences on its price.