This Swiss Bank Is Hitting Its Customers With Negative Interest Rates

This Swiss Bank Is Hitting Its Customers With Negative Interest Rates

A tiny bank in Switzerland will do the unthinkable by applying negative interest rates to the accounts of its customers. Indeed, the Alternative Bank Schweiz (ABS) informed its clients last month that it would start imposing interest charges on deposits starting next year. This represents the first time that a Swiss bank is applying negative interest rates to individual depositors.

For most current accounts, the bank will place a -0.125% interest rate on the account holdings. As for accounts with more than 100,000 Swiss francs, or about $98,650, the depositors would be subject to a -0.75% rate. Many believe that the bank is doing this in order to discourage unwanted currency investors from using the bank.

ABS was formed based on ideas associated from the 1960s protest movement. The bank has said that it would provide maneuvering room in order continue to finance projects that it considers to be “meaningful”.

The news comes after the Central Bank of Switzerland introduced its own negative deposit rate in January. This represented the abandonment of its three-year effort to keep down the exchange rate of the franc in order to protect exports. The central bank has lost a large amount of money by implementing these negative rates, as smaller banks in Switzerland have been finding other ways to keep their vaults full, instead of just working with the central bank.

The move was made in order to discourage foreign investors from buying and holding Swiss francs as a safe investment. This practice has been putting a large amount of pressure on the currency. After the central bank made this transition, several large Swiss banks have transferred their losses to some of their largest clients. However, no bank introduced negative interest rates to individual depositors, at least until now.

ABS CEO Martin Rohner has stated that the decision by the central bank to introduce negative interest rates has cost ABS large amounts of money. Rohner says that introducing negative interest rates is a better solution than simply increasing management fees.

Rohner said, “We have determined that applying a negative rate was a more transparent and fairer solution for our clientele.”

Needless to say some of the clients of ABS were less than happy to hear the news. Still, most customers have said that they understand the decision. At the present time, there have not been any signs of a large number of customers planning to leave the bank.

Meanwhile, there is concern that other banks could also initiate a similar practice. However, no other banks have announced plans for negative interest rates at this time.

ABS is based in the central Switzerland town of Olten. It says that various environmental groups, such as the Swiss Green Party and the Swiss branch of Greenpeace originally founded the bank. Most of the activities of the bank are focused on developing cooperative housing projects, providing affordable housing, creating sustainable energy solutions and organic farming. The bank has also supported projects such as a youth circus and the development of a new electric bicycle.

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