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Swiss Banks Expand Use of Negative Interest Rates

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11/23/2015

Earlier this year, the Swiss central bank joined Denmark and Sweden in implementing negative interest rates. Switzerland's key bank rate remains at negative 0.75 percent. Bloomberg reported late last month

In Switzerland there’s little sign of overheated property or stocks, or new consumption. Recently, Thomas Jordan, head of the Swiss National Bank, saw potential side effects but called negative rates an “important and unavoidable monetary instrument to weaken the attractiveness of the [Swiss] franc.

Bloomberg predicted that "In Switzerland, one bank, the Alternative Bank Schweiz, will impose an interest charge on retail deposits starting in January."

Sure enough the bank recently pulled the trigger on its plan.  Yahoo reports

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.

Unlike Sweden, where cash is rarely used, Switzerland reportedly has a much more cash-centric culture. Not surprisingly, negative rates in Sweden have not led to any notable flight to physical cash.  It remains to be seen, however, if a general move to negative rates in Switzerland will see as much success (from the central bank's point of view) as it has in Sweden. 

Countries in the more advanced states of a war on cash find negative rates easier to implement, and Switzlerland, unlike Sweden and the US, has note made war on cash aggressively. 

 

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Contact Ryan McMaken

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and The Austrian, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

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