Swiss Central Bank Plunges Into NIRP, Sends Deposit Rates Negative, Scrambles Against Safe-Haven Capital Flight

Tyler Durden's picture

Everyone thought that any major monetary policy surprises and/or capital controls today would come from Putin during his annual press conference. Boy were they wrong: just after 2 am Eastern, none other than the Swiss National Bank joined the ranks of the ECB in scrambling to stem the wave of capital flight, not to mention the cost of money, when it announced it too would start charging customers for the privilege of holding cash in its banks, when it revealed a negative, -0.25% interest rate on sight deposits: a step which according to the SNB was critical in maintaining the 1.20 EURCHF floor.

From the SNB:

The Swiss National Bank (SNB) is imposing an interest rate of –0.25% on sight deposit account balances at the SNB, with the aim of taking the three-month Libor into negative territory. It is thus expanding the target range for the three-month Libor to –0.75% to 0.25% and extending it to its usual width of 1 percentage point. Negative interest will be levied on balances exceeding a given exemption threshold.


The SNB reaffirms its commitment to the minimum exchange rate of CHF 1.20 per euro, and will continue to enforce it with the utmost determination. It remains the key instrument to avoid an undesirable tightening of monetary conditions resulting from a Swiss franc appreciation. Over the past few days, a number of factors have prompted increased demand for safe investments. The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and thereby supports the minimum exchange rate. The SNB is prepared to purchase foreign currency in unlimited quantities and to take further measures, if required.

The factors from the "past few days" in question that the SNB was envisioning to justify becoming the latest entrant to the NIRP monetary twilight zone: Russian capital flight. Per Bloomberg, "the SNB move follows Russia’s surprise interest-rate increase this week and hints at the investment pressures that resulted after that decision failed to stem a run on the ruble. Swiss officials acted as the turmoil, along with the imminent threat of quantitative easing from the ECB, kept the franc too close to its 1.20 per euro ceiling for comfort."

“This is not the magic bullet, but will buy them time,” said Peter Rosenstreich, head of market strategy at Swissquote in Gland, Switzerland. “This will relieve pressure from the floor in the short term, but not in the long term.”

The franc weakened after the announcement, trading at 1.2045 per euro at 11:08 a.m. in Zurich. Against the dollar it fell to 97.82 centimes.

To be sure, Russia's recent shocking rate hike to 17% was a factor in the Swiss decision. Then again to say that a few Russian billionaires took on the SNB and forced it to do a historic monetary policy move would be just a little bit naive. Surely, the reason for the capital flight had much more to do with the capital flight from "everywhere" as a result of the latest market turbulence which has seen a major flight out of risk assets and into fixed income assets, and also safe-haven currencies, at least until Janet Yellen's "renormalization" statement yesterday which purely coinicdentally had both keywords sought for by algos: "considerable time" and "patient."

What was also left unsaid is that the Swiss central bank is also worried about the pressure from the Eurozone as the ECB launches full-blown QE in 2015. And in a purely reflexive fashion, the SNB move also makes it that much more likely that the ECB itself will have to act even further, as central bank actions have now become a tit for tat exchange with other central banks in creeping global capital controls, even if nobody is willing to call it for what it is. One thing is clear: if and when the ECB does more, the SNB will again have no choice but to respond: as Bloomberg strategist Richard Jones writes "SNB’s decision today to introduce negative rates of -0.25% next month may be escalated if external factors like a large scale QE from ECB threatens the EUR/CHF floor, analysts say, adding that FX interventions will likely continue. Jan. 22 start date for SNB’s negative interest on sight deposits coincides with next ECB meeting, increasing the likelihood of QE announcement by the latter next month."

In any event, at least the Swiss were kind enough to give the Russians an advance notice that their cash is not welcome in the country. After all Russian billionaires could have been merely "Cyprused", all over again.

Finally, here is Goldman's take on the SNB move:

Bottom line: The Governing Board of the SNB surprisingly announced this morning that it will introduce a negative rate of -0.25% on sight deposit account balances at the SNB. The SNB's target range for the three-month Libor was also widened from 0.0% - +0.25% to -0.75% - +0.25%. In our view, today's rate decision simply underlines the determination of the SNB to enforce the minimum exchange rate target for the CHF against the Euro.

1. This morning, the SNB surprisingly announced that, on January 22, it will introduce a negative interest rate of -25bp on reserve holdings from banks at the SNB, above a threshold of 20 times the minimum reserve requirement. The SNB's target range for the three-month Libor was also widened from 0.0% - +0.25% to -0.75% - +0.25%. Over the last couple of days, the CHF has traded very close to the 1.20 level on the back of rising market volatility. The subsequent demand for safe investments attracted large capital inflows into Switzerland, eventually prompting the SNB to react.

2. According to the SNB, the measure is aimed at making investments into CHF less attractive. Although it is only banks that will have to pay the negative deposit rate, banks will pass on, to some extent at least, the negative rates to customers. It is noteworthy in that respect that some German banks - in response to the ECB's negative rates - have also started charging some clients negative deposit rates.

3. It remains to be seen how effective this measure will be and the SNB will continue to rely on FX interventions to defend the minimum exchange rate. But the measure in any case shows the determination of the SNB to maintain the lower bound for the CHF against the Euro.

Source: SNB

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Latina Lover's picture

Law of unintended consequences... with the USSA trying to destroy the Russian economy via a currency war and pushing their Saudi lap dogs to flood the market with oil, someone forgot to calculate the second order effects.  Or, didn't give a shit. The Neocons/Neofascists will throw  Canada under the bus if it means speedbump rattles for the Russkies..

Arius's picture

it reinforces the view from that JPM analyst that ruble doesnt matter to US economy... incidentally, as mentioned above there are quite a few other things besides a few russians billioners ... but hey, we cant even cheer "let the games begin" anymorev ... it will be considered unpatriotic and short sighted ...


yeah well, i still say bring it on you suckers ... we know what you have cooked for us

GetZeeGold's picture



Dammit.....totally forgot about the Swiss.

philipat's picture

Welcome to the Matrix. The Banks don't want your money and don't care about you. Shit, we can print as much money as we need so just leave us alone and let us play our currency war games. The interests of our people? HAhahahahaha......

paint it red call it hell's picture

Whats theirs is theirs and whats yours is theirs too.

bania's picture

My wife's nirp policy is way worse than this.

MalteseFalcon's picture

"second order effects" = collateral damage.

Stay nimble!

CH1's picture

Lesson to the Swiss: Sheep are to be shorn.

You obeyed them and voted to abandon your gold. And now you pay to save.


Muddy1's picture

and one day fleeced

BuddyEffed's picture

This isn't your fathers banking business model anymore.   We're not in Kansas anymore Toto.  Remember 4.25 percent interests savings growth per year?   And it's gone!   I guess it's because growth is gone too.

Ahoy Polloi's picture

Does anyone actually believe that the Swiss 'VOTED' to abandon their gold? Does anyone actually believe in the results of any so-called 'VOTE'?


- or 'markets'?

- or 'BLS reports'?

- or 'TV propaganda'?

- or 'quarterly P/L statements'?


F***ing Matrix! ~ I believe 'The Onion' stories more than I believe any of all the BS that you read about every day.

BaBaBouy's picture

SWISS: Please, PLease, PLEASE, STOP Sending Us Your Paper Fiats Keynesian Virtual MONEY!!!

PLEASE, Our Computers Can't Count That High, Keep Your Damn Fiats Money!!!

smlbizman's picture used to be 5% as an "always" rate

Meremortal's picture

It's because the hyperinflationists were as wrong as they could be, which has been obvious for a long time but quietly ignored as it's so embarrassing to miss that badly.

Wrong, just the like "total economic collapse" people have been wrong for years.

"Moar doom fantasies needed, stat! We reject your reality and construct our own!"

Meanwhile Japan is going to heal and China is getting old rather than rich. Russis is doing what is always does, fail. 

Peak Oil and global warming are jokes. Get ready for another century of American dominance.

Horrific to contemplate, isn't it? 


papaclop's picture

Brilliant observation. It rhymes with FDR's screwing of Americans when he banned private gold ownership.

papaclop's picture

Brilliant observation. It rhymes with FDR's screwing of Americans when he banned private gold ownership.

papaclop's picture

Brilliant observation. It rhymes with FDR's screwing of Americans when he banned private gold ownership.

Took Red Pill's picture

Jim Rickards had an interesting viewpoint on this. Much of Rusia's debt is in corporate bonds held by many Americans in their 401k. If Russia goes down it will spread;


Muddy1's picture

I didn't know this, but for other reasons cashed my 401 out 4 years ago.

IronForge's picture

They won't.

They - unlike the USA - don't have much Debt relative to their GDP.

Fun Facts's picture

It's all a variation on heads we win tails you lose.

This of course explains the vanishing middle class across the western world, the domain of the ZWO gods on earth, holding us all hostage with their central bank tyranny.

RaceToTheBottom's picture

The Swiss were morons thinking that they could plug to the Euro without being affected by it.

You cannot be half prengnant.

The arrogance of Banksters is always amazing.

CH1's picture

The arrogance of Banksters is always amazing.

The abject obedience of the masses is amazing!

ejmoosa's picture

Bears repeating...

Think about the fact that they are telling the Swiss that their currency has too much purchasing power relative to other currencies and that must change.  So we need to make you just a bit poorer relative to the rest of the world.

WTF are they to decide that?

And as you say, the masses tolerate it.

Ghordius's picture

you mean the Swiss National Bank should have done nothing? and let the CHF appreciate to... where? just look how international FX market smacked down the NOK, in a moment where the Ruble was hiding

your "do nothing" policy would have meant that every betting portfolio and FX algo of the planet could have played with the CHF, up, and down, and up again. what fun it is when you have a ball, kids

meanwhile... the Swiss economy is tightly integrated with the eurozone's. they compete in the eurozone. for criminy, you can expect them to send you pricelists in EUR

those international FX markets are huge. for them, small and medium sized currencies are playthings. they don't need fundamentals, just... excuses

there is a reason for the EUR alliance, and it's there to see... if you want. size matters

RaceToTheBottom's picture

I can not argue about the NOK.   That was a smackdown, but I am not sure it is the same thing.

I admit I am not living it daily so have outsider views.  I will have to think more about it.

Ghordius's picture

to put it in other terms, if the CHF could appreciate according the huge demand (caused by Safe-Haven Capital Flight)...

...the Swiss Economy, particularly tourism, chemicals, pharma and the machine parts industry would have to switch to the EUR

it's the same effect as from "dollarization". the economy prefers the "bad" but stable currency to the "good" but unstable, appreciating currency

the usual way to explain it is "bad money drives out good", or Gresham's_law

the more detailed "law" states: "When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation."

now of course I already hear: "but G, the Swiss have their own government". well, yes, but the Swiss economy is very small, and in the middle of the eurozone's, and tightly integrated to it

for all purposes, the CHF is now an informal member of the EUR "gang" of national currencies in hiding

IronForge's picture

"The Swiss were morons thinking that they could plug to the Euro without being affected by it."


They're not.  They're playing this quite well. 

JRobby's picture

Just walk into any TBTF branch that you do not have an account with and watch what happens. (Wells is especially entertaining and apparently, successful)


If you really like sociology and like a fun experiment, walk in with a big cashier's check drawn on a competitor.



Mountainview's picture

Hapless state officers at the SNB without imagination. Instead of lifting the disasterous EUR/CHF 1.20 peg and replace it by something more shrewed (trade weighted basket peg), they punish savers by zero rates! Hopeless!

rwe2late's picture

 I doubt the SNB Governing Board members

who decide policy are either "hapless" or "without imagination".


BUT,  they are certainly promoting other interests than those of "savers".

Urban Redneck's picture

That's why we have CHF 1000 notes and safe deposit boxes. Deposit rates have been 0% for a long time and outside of housing and health insurance inflation has basically been 0% for a long time.

Savers aren't being punished by this, businesses that require high volume electronic liquidity are.

HK's picture

Got to bring the Russian bear to its knees

Well, maybe not the Russian bear, maybe the Swedes

I know, it’s the Swiss, not the Swedes, Swiss doesn’t rhyme with knees, fuck all that, we need to get pissed, which rhymes with Swiss.

It didn’t start today nor yesterday nor 30 years ago but has been a problem throughout history. The bread and circus ends with us either being in chains or breaking the chains, what’s it going to be?

The lyrics:

A little insight into the song:

USisCorrupt's picture

I do believe the Chess player Putin will announce something today saying how China is on their side and those playing checkers and marbles will wet their pants.


The entertainment is now daily I am so happy everything is just so perfect in this world.

Arius's picture

enjoy while it last ... putin is 100 % a team player ... there is only one team, besides appearances

ZH Snob's picture

this is what you swiss get for voting against the gold initiative and trusting your central bankers.

Ghordius's picture

I would not have voted for that initiative. I've written a few times about that, here in ZH. it was too much

the initiative asked for 1) a 20% gold quota on SNB assets; 2) repatriation of gold; and 3) ban on sales of gold by the SNB

1) or/and 2) would have been ok. 2) and/or 3) too. but all together? The Swiss happen to know a bit better their own situation

further, the SNB happens to be owned by the state banks, in Switzerland. which are owned by the Swiss states

IndyPat's picture

Yeah, I hear ya shill.
I will say this, you are tireless in your deluded commitment to something that is 100% doomed...right along with the rest of the economies. May as well be hugging a fucking bomb. Does it really make you feel more secure knowing you wish to drag others down the hole with you? Absolute equal odds of it blowing up anyway, but whatever you do, don't make a Hail Mary pass in the direction of sanity.
They should forgo their our security and interests and be subordinate to the overall instability and madness of the entire EU. I see what you are saying. Makes a lot of since, if everyone else is running off a cliff, why would the Swiss think that's a bad idea?
Canada and the U.S. economies are tied pretty tight. if the Canadains all the sudden said fuck it, enough of this silly shit, we are going gold standard, I wouldn't whine. First, it's smart. Second, it's none of my beeswax. Could it hurt me here in the US? Sure. But it wasn't their sane action that did it, it's the madmen thieves in control of our banks here. If the US chooses thievery as usual, it's on us, not the Canadians.

froze25's picture

You sir have a dangerous sense of self accountablity.  You need to blame others for your misfortunes before the thought police get you.  Haven't you listened to the prophet Al Sharpton or the Cleric Jesse Jackson they have been preaching the scriptures for sometime now on how "its everyones fault but your own".  

Ghordius's picture

"...why would the Swiss think that's a bad idea?" whatever you are talking about, note that the Swiss do think it's a good idea to peg the CHF to the EUR. Explain to me why

perhaps they don't happen to see the eurozone/EU as something instable or mad? What do they know about? It just happens to be their neighbours

IndyPat's picture

So, you are suggesting economic suicide is a neighborly act?
Got some strange customs over there, but ok.

I think the fact that they had the vote says different. The outcome of the vote was sad but not surprising.

Urban Redneck's picture

The referendum was a bullshit non-solution to actual problems Switzerland faces.

The best solution for Switzerland would be to break the single currency into 3 separate currencies to address the primary domestic and international uses of the CHF and remove control of Swiss gold from the SNB and the CHF.

IndyPat's picture

Word. Ok, yeah. But was it a < bullshit solution than rolling to the EU collective lemming status quo horseshit?
The point is Swiss should be doing what is good for the Swiss.

If they were so damn neighborly as shill boy would have you believe, they would have gone full EU retard. But they didn't, did they?

Urban Redneck's picture

The sacrifice of sovereignty to join the EU was about as unpopular as the poorly worded gold initiative was. I suspect the sacrifice of monetary sovereignty would be even more unpopular.

The Swiss are neighborly, but I think Brussels (and perhaps Ghordius) think the Swiss should either jump into bed with the EU/Eurozone or get treated just like every other foreigner. People (and States) should have "special relationships" with their neighbors, differentiated from the relationships with family and strangers. But the Statecraft is almost always power-politics, despite the proliferation of the "Liberal" schools of international relations.

Ghordius's picture

ehm... the real problem Brussels has with Berne is... London

Big Problem, London. Way more then most imagine

Ghordius's picture

UR, re "Brussels (and perhaps Ghordius) think the Swiss should either jump into bed with the EU/Eurozone or get treated just like every other foreigner."

seen from distance, it would make sense, and there are many MEPs that do think so

personally, I think it would be mad. Switzerland deserves a special treatment, not because of the Swiss, but because of us

in all those alliances in which our european sovereigns engage - because of their size, and because of the size of the other main alliances/markets/etc - there is always the tendency of engaging in power-politics, and screw "the small ones", or engage in arrogant "either you are with us or against us" powerplays

and this is a tendency that has to be discouraged. Switzerland is completely encircled by "us". Yet we have to judge our moral high ground on how we treat the small

luckily, we do have plenty of small sovereigns in our alliances that do make those considerations, and do discourage the medium-sized ones from this kind of thinking. we just have to keep it up

further, our alliances have to contain the "exit door" option. which is the very basis of confederation

Urban Redneck's picture

Thanks for the clarification!

IndyPat's picture

I admire Switzerland on so many levels; much more so than any other country in Europe and certainly more than my nation in its current horrible state. Many principles the US only talks, the Swiss walk or at least did for a very long time. I take inspiration from her.

It's demoralizing and hard to watch.

Mountainview's picture

Trusting the SNB bankers, a huge mistake. Look at the CV aof the new- first female- member- a fine career with the IMF and OECD- all the right places responsible for the current mess.