This page has been archived and commenting is disabled.
Swiss Bank "Goes There", Applies Negative Rates To Retail Deposits
Back in September in “How Mario Draghi Can Force The Swiss National Bank To Go ‘Nuclear On Depositors,” we discussed the implications of the ECB’s (likely) decision to plunge further into NIRP-dom at the bank’s December meeting.
In short, DM central banks - with the possible exception of the Fed which is about to create a rather meaningful policy divergence with its core CB brethren - are in a proverbial race to bottom. It’s a beggar-thy-neighbor monetary policy regime and the more stubborn inflation expectations prove to be, the more aggressive the tit-for-tat easing, as everyone involved scrambles to protect their currency in the face of incessant competitive devaluations on all sides.
As we outlined in great detail in the post linked above, the ECB’s ultra dovish lean has the potential to create a lot of problems for the Riksbank, the Norges Bank, and the SNB.
Sweden is running out of options for a QE program that’s already broken once (see here and here) and although Stefan Ingves will probably tell you there’s more room to cut in the event Draghi moves on the depo rate, the Riksbank is already at -0.35 and the housing bubble has reached epic proportions. Of course staying on hold in the event of an ECB cut means the krona will soar and then, well, there goes any hope of hitting the elusive inflation target.
Norway, on the other hand, can’t even begin to think about QE because frankly, they’re too rich. That is, the Norges Bank wouldn’t have enough assets to buy without breaking the market pretty much immediately. That leaves rate cuts and to be sure, at +0.75 (yes, that’s right, not everyone is in NIRP), there’s probably a bit of breathing room there for Oeystein Olsen and he may need it come next month.
And then there’s the SNB which faces a unique problem. As Barclays noted a few months ago:
“A cut in the ECB’s deposit rate further into negative territory likely would have a significant impact on the EURCHF exchange rate and provoke a more immediate response from the SNB. Indeed, we expect that a cut in the ECB’s deposit rate may have a greater effect on EURCHF than on other EUR crosses. Switzerland applies its negative deposit rate to only a fraction of reserves, currently about 1/3rd of sight deposits by our calculation. In contrast, negative deposit rates apply to all reserves held at the ECB, Riksbank and Denmark’s Nationalbank. Consequently, a cut to the ECB’s deposit rate likely has a larger impact both on the economy and on the exchange rate than a proportionate cut by the SNB.
In other words, if the SNB feels boxed in - i.e. if we get excessive upward pressure on the franc in the face of an uber dovish Draghi - the Swiss could potentially remove all exemptions from negative rates. Here’s Barclays on what the likely outcome of such a decision would be:
A removal of domestic banks’ exemption from negative deposit rates likely would force Swiss banks to pass on negative deposit rates as it would increase the proportion of assets charged negative rates to over 20%.
As Deutsche Bank pointed out last month, “banks have not passed on negative policy rates to depositors. In none of the four economies are household deposit rates in negative territory, either for outstanding balances or new business.”
The reason banks haven't passed on NIRP to depositors is essentially two-fold. First, banks want to avoid damaging customer relationships for as long as absolutely possible. Second - and more importantly - banks have found other ways to offset negative rates. Here's Detusche again: "The SNB have noted that the consequence of introducing negative rates earlier this year was rising, not falling, mortgage rates as banks sought to protect falling liability margins by raising long-end rates. In a similar vein, Danish banks appeared to raise administration fees on new mortgages after rates first turned negative back in 2012."
Well this can only go on for so long and sure enough, as AFP reports, "a tiny Swiss bank specialised in financing social and environmental projects will on January 1 go where no retail lender has gone before, applying negative interest rates on individual clients." Here's more:
The Alternative Bank Schweiz (ABS) caused shockwaves with a letter sent to all clients in mid-October informing them that it would begin imposing interest charges on deposits in 2016.
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.
ABS, which grew out of the ideals the 1960's protest movement, justified the unprecedented development by saying it would provide manoeuvering room for financing "meaningful projects".
The move did not go unnoticed in Swiss financial circles as banks in the wealthy Alpine nation search for ways to deal with the negative rates imposed on them by the central bank in January.
"This decision on negative rates is costing us a lot of money -- pretty much the equivalent of our entire annual profit last year," ABS chief Martin Rohner told AFP.
Who's set to suffer you ask? Well, Greenpeace for one, and a whole host of other socially responsible companies. "Based in the central town of Olten, ABS counts the Swiss branch of environmental group Greenpeace and the Swiss Green Party among its founding organisations," AFP continues, adding that "other projects it has backed include a youth circus and a company creating a new kind of electric bicycle."
What's the world coming to when central banks' NIRP adventures mean youth circuses and green bicycle makers have to pay the bank interest on their deposits?
Anyway, it's not about ABS' individual clients (although we're sure some readers will find it amusing that a socially responsible lender was the first bank to charge individual accounts for deposits), but rather what that lender's decision means for depositors in NIRP countries as a whole, and on that note, we'll close with one last quote from Rohner:
"Some of ABS's clients had voiced fears the move would open the door for big banks to start applying negative rates on individuals."
»
- 788 reads
- Printer-friendly version
- Send to friend
- advertisements -
Kool...
how u like that rejected Referndum on Gold now mother fuckers...
So at least gold doesn't pay negative interest?
Only after the wedding.
Weddings are negative interest, have been for years. You commit, and then you pay.
and then you commit again as in suicide
Bulli$h!!!!
Stealing the money from those inbreeds who think saving is much more important than playing the US or Euro casinos (Stock markets) is an effective method to get the Dow to 100K!
Totally surprised to see a bank "making a profit".
Totally unsurprised to see a bank complain they can't steal MOAR.
Withdraw your unsecured deposits and tighten the noose. This kills Fiat stone dead.
They might want to start hoarding vaseline. Sooner or later they'll need it BIG TIME:
http://goo.gl/VhZdyZ
Not sure sure why the banks are feeling so concerned for the depositors. It's the upcoming wire-transfers that should have the banks worried.
Can anyone in the establishment tell me why the direct and deliberate destruction of capital (neg interest rates) is a wise or workable solution EVER, let alone to a system saturated with leverage ??
or are committed...as in Funny Farm.
as I found out with my ex wife. in the words of Steven Wright, marriage is all about compromise, the compromise she gets everything and you get nothing...much like the future of our banking system. no matter what you put in, you will get less back.
...and pay.
Wives and children sure are a capital hazard.
Time for the popcorn, the tsunami is heading for the shore.
@SG ~ lol
But don't forget, "gold has no intrinsic value" according to Greenspan. Or was it that other genius, Bernanke who said that? Gold has no intrinsic value... meaning paper does I guess?
And these brilliants are running the largest central bank in the world? No wonder the planet is in for a world of hurt.
They are 'caputred' drones who pay alliegance to the 'deep state', i.e. the Rothchilds.
Just the tip sweetheart, pinky promise
HELLO MATTRESS !!
This will never happen in America...until it does
Thus the big push to eliminate cash. You will be forced to invest in their shit rigged market or pay them for the privlage of stealing from you.
They would have to have a helluva negative interest rate to convince me to put my money into that government run casino
This will never happen in America...until it does
You will never click 3 times to post a comment ~ until you do.
Don't be mean, some people, St-tu-utter.
Where is my safe space from your microaggression?
This will never happen in America...until it does
"The new Seely VaultBed comes with all the comfort and security you'd expect from a Mattress."
Isn't that the same as stealing your money? The Fed cannot be far behind. The 0.1% need more of your money. They only have more than the bottom 90% today.
Your money isn't safe at home! Someone could rob you!
Best to pay the banks - which are safe institutions a percentage to maintain its safety.
:)
We call them government. :P
http://usuncut.com/news/police-stole-citizens-burglaries-combined-last-y...
You actually get fucked at least twice.
It's obviously well past time to FAIL THE BANKS.
Yes, it's taxation without representation, or, theft.
On your marks, get set, BANK RUN!
No cash allowed!!!! You spend it or we take it, bitch. Stimulus!
Cash still is allowed, but the next step would be to limit the amount people can withdraw per day. People would be going back every day. At least, I sure as hell would... every single day until the account is dead empty. Lineups for months. A drawdown like that would cripple the banks, they know it, and they're still going to do this anyway. Because bankers are fucking stupid. The best thing the public could do would be to withdraw everything, even if it took months, and collapse those bastards into dust.
They have the entire goonery of the state behind them, including immunity and financial indemnity so what do they have to fear?
All the goonery in the world isn't going to do them any good at all if the deposit base for all their loans vanishes. Fractional reserve... they have to keep that fraction on their books (our deposits). If we the unwashed masses pull those deposits... poof, their entire empire crumbles, instantly. That's what they have to fear, but they seem too stupid to see that that's exactly what they are going to accomplish. By going NIRP, they are creating incentive for the entire retail community to pull their money out of banks. IOW, they are creating incentive for their own destruction. These are not smart people.
Talk about double jeopardy. We have a slippery slope of collapsing debt utility in a debt based money system.
Critical mass has been achieved. The current fraudulent system has to collapse in order to make way for an entirely new, fraudulent system. But first....a crisis will unfold.
And yet Gold goes nowhere? So much for Gibson's Paradox. I would find it incredible if someone being charged interest left their funds in that bank and if cash is restricted, hello gold!
Of course it goes 'nowhere' because the price is being surpressed by sales of 'paper gold' in the Comex market. Pure, unadulterated manipulation and theft. But as Eric Sprott noted in his recent column, he is very tempted to buy up the last 160,000 ounces of gold the Comex has and sink them. That would take about 175 Million, but then he is a billionaire, so he could probably afford it. On the other hand the Comex has you coming and going. They reserve the 'right' to declare a 'force majeur' condition, i.e. no gold for delivery, and then pay you out at the paper price.
If people don't see what is going on here then I don't know what anybody can say.
I'm sorry, but we have a no cash policy, and even if we kept that much in the bank vault at any given time, we don't allow withdrawals over $500 per day. See you tomorrow.
Fuck you Draghi
All your monies are belong to us.
And they probably want the toaster back too
You have to give them a toaster if you open a new account.
While you're at it, you have to put your dick in it and let them grill a panino.
Hahahaha. Post of the week.
Maybe a wet hair dryer would do the trick. Or at least, a flame throwing hair dryer?
You're toast.
They asked for my towel back, so I gave it to them with a nice big skid mark.
How the hell is an electric bicycle green? Certainly not greener than a good old fashioned human powered bike. Lazy liberals oughta learn to pedal to move their fat asses like I do. I made a much more environmentally friendly bicycle out of recycled parts.
...because it doesn't use gas... duh!
Are you being stupid? Oh, right, the electricity comes from the battery, and the battery is powered by unicorns.
I bought an electric bike but was disappointed to find that I could only ride in a 100 foot radius from the plugin.
You just need moar extention cords...duh!
0.01 savings account interest rate offered by a big-box bank in the U.S.
Heard this on the radio last night.
What is that in real terms -3.5%??
-11.5% (real,,,, real terms)
Hell, I am waiting for negative mortgage rates. Once I see that I will take a new mortgage out on my currently-paid-for home and plow it all into Au & Ag. Bring it on Mo-Fos!
That is one hell of a good plan. You couldn't possibly lose. I'd retain a bit of that cash under the bed though.
When you think about it, the farther you go 'underwater', eventually, you pass thru the Earth's core, onto the other side, & thru the sky & atmosphere into orbit & outer space!
#WINNING!
So how long before they pay me to take a loan? And how many times do I have to roll it over before I owe nothing?
And we have to assume this negative interest rate goes hand in hand with severe cash withdraw restrictions and ATM limits??
They need time to steal enough of your money....
If you loan me money for a hamburger today,
you can buy me a hamburger tomorrow as repayment.
- Wimpy
Hey lend me $20, but only give me $10 rght now-then ill owe you $10 and youll owe me $10 and we'll be even
Its a safekeeping fee. Why should the services of 'banks' be free?
Not even a sarc tag - if'n you all be serious wit this comment, go fuck yourself with a barbed wire wrapped baseball bat lubed up with flaming napalm. You little banksucker, you.
Well that was graphic.
haha funny pitz, you forgot the sarc tag.
Why should anyone have to pay money to store paper, or worse, a bunch of digits on a computer drive?
Legally considered,
the 'money' is no longer yours once you deposit it at the bank.
It is becomes the bank's property as a loan which the bank can then use
as collateral for fractional creativity. One hopes the bank will repay the 'loan' in full.
We are not talking about a fee for a safety deposit box.
https://www.youtube.com/watch?v=6nSKkwzwdW4
Do they have negative interest rates on checking accounts as well? They don't have positive interest rates on checking accounts, so I don't see any reason to have negative interest rates on them.
You mean that those Gnomes of Zurich are actually going to stiff little Heidi?
It was probably either this or sending fees sky-high to cover losses incurred pouring depositor money into "socially responsible" cesspits and scams only a leftie could love.
NIRP just gives them an excuse to do this and blame the big bad SNB.
That should read, "Alternative Bank Scheisse (ABS)".
Feel the Bern...
I was just in Switzerland visiting family. I was telling my cousin about the money controls here. He was horrified how cash is looked down upon in the US. I guess I better let him know that his turn is coming.
Side note, it's amazing the massive amounts of cash found in the average store cash register over there. They don't have a problem making change for a 100, 200, 500 or 1000! Around here, they damn near call the cops if you pull out a $50 or $100. Then they can't make change either since the till won't have more than $40 total in it.
indeed in Ireland there is still some cash floating about, but there is a definate move to electronic payments.. its impemation is slowed because of the wealthy agri sector we have, whom still like to count out the '50's
I'd imagine keeping less than 40 bucks in the 7/11 till is more to do with detering the crack heads
I had that exact problem in Las Vegas (just in the shops), the ATM machines gave out 100 dollar notes, but the supermarket I tried to use it in would not even accept it, fortunately I could change it in the casino, but it is loopy how such a small note is considered too large.
Slightly off topic, but complimentary nonetheless and a true story.. man drives into local VW garage today with 2011 Volvo, drives out with brand new VW AND a cheque for €2,000 because the max money down on the new motor is 30% (as his Volvo being "worth" more than 30% down he gets the residual back in cash) all financed by way some credit plan drafted up by VW bank. How much more upside down can the world get???? ... they will do whatever it takes to make the economy LOOK like its growing... sell the finance deal....get those motors out - ... moar debt!!! makes the emission story look like a fairy tale...
I'm converting everything I can into bullion, as much as I can get, and hiding it behind a mountain of granite in Ireland, because the carnage is going to be unimaginable when this eventually goes nuclear. Will the gold protect? who knows but id rather own bullion than a fuckin smoky VW on finance.
www.teamramgold.com/about-us
Well, at least they didn't try to Simonize his car and sell him some floor-mats @ 300% markup.
How very magnanimous of VW not to con the guy like that.. haha Not!! still the gullible sucker thinks life is great
What is holding me back to put all my cash under my bed?
one reason ... Banker induced inflation!!!.that shit will devour your savings quicker than a rat on crystal meth..bullion is the only long term secure storage of wealth, AU your mattress to the ceiling, for a great nights sleep..
Nothing ..............until cash is banned.
We gota get away from these fucking banks.
that statement carries more wisdom than perhaps you realise.. banks are totally out of control, completely rogue yet practically impossible to remove yourself from their web.
Here are some signs of a coming recession.
1. Business loans for M&A not CAPEX.
http://www.zerohedge.com/news/2015-10-15/there-goes-final-pillar-us-recovery-loan-growth-paradox-explained
2. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
3. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
4. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
5. Fed sees 2 bubbles
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
o Commercial Property higher than pre-2007 level.
http://nreionline.com/finance-investment/cre-prices-are-now-officially-above-pre-recession-peak
o Global Corporate Debt Market hits $5 trillion.
http://fn.dealogic.com/fn/DCMRank.htm
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
DK nice sentiments. Can we even know what happens when a recession goes into a recession?
This economy has been in a state of lie powered suspended animation.
How can you know what to do in this instance?
" Fuck You, Pay Me"... Comes to mind.?
Do when does the Comex blow up with 300:1 paper to physical...with neg interest rates on deposits it forces time value to nothing on currency....therefore it is no longer money....this is not about forcing people to spend but systematically destroying the currency. bye bye US dollar, treasuries, equities....just remember the entire Zimbabwae stock market can buy 3 eggs.....good work you corrupt Bastards!
Government Goon Squads will start breaking open American's safe deposit boxes looking for hidden cash! It's happened before it will happen again!!
What's in your wallet? Nothing!!!
Let's all get neg interest rate loans!! weeeeeeeeeeee by the time my new car loan is done I will have zero balance to buy a new one....
Hello sock.
So now I need to spend my cash now before it loses its value through "holding' attrition? Well at least its not like hyperinflation, where I need to spend my cash now before it loses value through...um wait...
Sweden needs more multiculturalism to drive a welfare state model into obviation. Take notes Negro Obama of the Banana Republic of United States. It's not going to work.
The consequences of Mass Immigration: 'Cultural Enrichment' in ...
How could they go neg ...and raise rates at the same time ? ......say what
Welcome to the fucked-up world of QE, where they run the printers 24/7 and banks beg you to not deposit your money with them, and if you do, you'll pay.
Meanwhile they want to ban cash.
What's interesting here is I think they genuinely don't want the deposits, because they're trying to protect their exchange rate. So it's not a first-level scam to increase their skim like the other banks are trying, but a once-removed way of protecting their export business.
There are so many uncoordinated and secondary and unintended consequences here there's no doubt in my mind we're on the short part of the countdown to this insanity blowing up.
At this point all I can think is this is the intended outcome, at the same time we've got a major manufactured terrorist threat by drug-addled crazies and a full court press across multiple countries to remove any means of protecting your privacy. This is the NWO all or nothing end game being rolled out.
Putting money in a bank is sex with Charlie Sheen crazy.
Do You See What Happens, Larry, When You Fuck a Stranger in the Ass with a Pneumatic Tube?