Swiss bank Credit Suisse stated this week that it would start applying negative interest of 0.75 % to bank accounts that have balances over 2 million Swiss francs. In other words if individuals or business entities have amount of around 3 million Swiss francs in the bank for an year they will be charged 7500 francs annually. Business customers that hold more than 10 million francs the levy on their funds is 0.85 %. The new charges will come into effect for corporate customers from 15th November and for individual account holders on 1st January.
This policy is due to unusually low interest rates in the country. In Switzerland negative interest rates have been the norm since 2015 and for 19 countries in European Union which use euro since 2014. This is meant to encourage borrowing and enable economic stimulation which is becoming a burden for banks in the region. This extraordinary monetary policy is making it tough for banks to generate profits on loans and mortgages and making them pay extra money to keep excess funds in central banks. Frustrated with continuous trend of negative rates Swiss banks decided to shift some of the burden to their affluent customers.
UBS Bank too introduced deposit fees for large corporate customers in 2015 and said in July this year that it will take a similar approach. From November it will introduce flat fee of 0.75 % for bank balances above 2 million francs that are held in Switzerland. It will also reducethreshold of 0.6 % fee on euro balances from holding above $557000 from previous level of $1.1 million. According to Christine Lagarde who took charge of European Central Bank during the time that these policies came into effect stated that citizens that use Euro as currency would be in a worse condition without negative interest rates.