SNB introduces negative interest rates

Related Content Related Video White Papers Related Articles

The Swiss National Bank (SNB) has announced the reduction of its target range for the three-month Libor range into negative territory as of 22 January, in a bid to counteract a further appreciation of the Franc.

The SNB confirmed the introduction of a -0.25% interest rate on sight deposit account balances thus expanding the target rate for the three-month Libor to -0.75% to 0.25%. An exemption threshold of at least CHF10m (€8.31m) is applied to each individual account holder.

Following on from the announcement, the Franc dropped by 0.22% to a two month low against the Euro.

“Over the past few days, a number of factors have prompted increased demand for safe investments” the SNB stated in reference to the currency crisis in Russia, which put growing pressure on the 1.20 cap against the Euro.

Commenting on the impact for the Swiss Asset Management Industry, Markus Fuchs, managing director of SFAMA stated: “Currency is one of many other factors to take into account when analaysing the competitiveness of the financial industry. In addition, the impact of a strong Franc will be limited for investors, because they can decide independently whether to conduct investments denominated in CHF or another currency.”

“For CHF denominated products there is, if required still the option to use futures or currency certificates as a currency hedge. The low interest (Libor)is the price tag attached to the safety measures, ” Fuchs added.

The SNB measures will be implemented as of 22 January, the date of the first monetary policy meeting of the European Central Bank’s governing council in the new year.

Mona Dohle
Mona Dohle speaks German and Dutch, she is DACH & Benelux Correspondent for InvestmentEurope. Prior to that, she worked as a journalist in Egypt and Palestine. She started her career as a journalist working for a local German newspaper. Mona graduated with an MSc in Development Studies from SOAS and has completed the CISI Certificate in International Wealth and Investment Management.

Read more from Mona Dohle

Close Window
View the Magazine

I also agree to receive editorial emails from InvestmentEurope
I also agree to receive event communications for InvestmentEurope
I also agree to receive other communications emails from InvestmentEurope
I agree to the terms of service *

You need to fill all required fields!