Photo: Swiss National Bank
Negative rates mulled to lower Swiss franc
Published: 27 Jul 2012 12:08 GMT+02:00 | Print version
Updated: 27 Jul 2012 17:08 GMT+02:00
Switzerland's central bank could soon make investors pay for the privilege of depositing money in Switzerland’s banks.
The Swiss National Bank (SNB) is contemplating imposing negative interest rates to ease the flow of capital pouring into the country.
Investors jittery over problems in the eurozone, where Greece and Spain are flirting with financial collapse, see Switzerland as a safe haven.
This has put upward pressure on the value of the Swiss franc, forcing the SNB to set a floor of 1.20 against the euro last September.
But observers now wonder whether the central bank will have to go further.
Denmark, another country regarded as a safe haven outside the eurozone, introduced negative interest rates earlier this month.
These oblige banks to pay 0.2 percent to deposit money with the Danish central bank.
Experts appear divided over whether Switzerland will follow suit, with many believing a negative interest rate would only be introduced in a worst-case scenario for the eurozone.
“You can safely assume that the Swiss central bank is closely watching what their Danish colleagues are doing,” Maxime Botteron, an economist at Credit Suisse Group AG (CSGN) in Zurich, told Bloomberg News.
“Should the situation deteriorate, they might follow suit and introduce negative rates on banks’ sight deposits.”
Finance Minister Eveline Widmer-Schlumpf said last month that the government was regularly evaluating the possibility of adding extra measures to fight the franc’s strength.
But she said such measures would only be a “last resort”.
The high value of the franc makes it difficult for Swiss exporters to compete in the eurozone because the value of their products rises for purchasers in the zone, Switzerland’s biggest trade partner.
According to estimates from OECD (Organisation for Economic Cooperation and Development), the Swiss franc remains 37 percent overvalued against the euro based on purchasing power.
Today's headlines
US actress Eva Longoria poses on Friday at the 66th edition of the Cannes Film Festival in Cannes. Photo: AFP
Jewellery worth more than $1 million made by Swiss luxury watchmaker and jeweller Chopard and due to be loaned to stars walking the red carpet at the Cannes film festival were stolen from a hotel, French police said on Friday.
READ () »
Chinese Premier Li Keqiang. Photo: AFP
Chinese Premier Li Keqiang embarks this weekend on his first foreign trip since taking office, with a stop in Switzerland on the itinerary and free trade talks between the two countries close to completion.
READ () »
The former Salvation Army band, Takasa, shorn of their uniforms. Photo:Eurovision
The Salvation Army band carrying Switzerland’s hopes into the Eurovision Song Contest was vanquished on Thursday night in Malmö, Sweden.
READ () »
Photo: Romano
More than a third of Geneva’s active working population lives outside the canton, with the majority residing in neighbouring France and the rest largely in the canton of Vaud, according to a report issued on Thursday.
READ () »
World Cycling Centre in Aigle, canton of Vaud, home to the UCI. Photo: Wikimedia Commons
International Cycling Union (UCI) president Pat McQuaid can count on the support of the Swiss federation in his bid for re-election, the sport's global governing body said on Thursday.
READ () »
Swiss goalie Martin Gerber prepares to celebrate victory with team-mates. Photo: Andre Ringuette/HHOF-IIHF Images
Switzerland headed to the world ice hockey championship semifinals after a 2-1 win over the Czech Republic on Thursday in Stockholm.
READ () »
John Bond, just one of several former Xtrata executives sacked from Glencore Xstrata board. Photo: Fabrice Coffrini/AFP
The chairman of newborn mining and commodities giant Glencore Xstrata, John Bond, was on Thursday axed by its annual general meeting in Zug, just weeks after the Swiss-based group was created via a merger of two key players.
READ () »
United Nations chief Ban Ki-moon has nominated former Kenyan minister and member of parliament Mukhisa Kituyi to lead the UN's Geneva-based trade and development body when the current chief steps down at the end of August.
READ () »
Richemont headquarters in Geneva. Photo: Richemont
Geneva-based luxury goods giant Richemont boosted net profit for the 2012-2013 year by 30 percent as expected, with strong performances in its jewellery and watch divisions and by favourable exchange rates, the group said on Thursday.
READ () »
Swiss-based labour federations Industrial Global Union and UNI Global Union on Thursday praised top retailers for joining their drive to make Bangladesh's garment factories safer, after 1,127 people died in a factory collapse last month.
READ () »
Your comments about this article:
The comments below have not been moderated in advance and are not produced by The Local unless clearly stated. Readers are responsible for the content of their own comments. Comments that breach our terms and conditions will be removed.