Despite UBS’s decision: negative interest rates for small customers remain a taboo
Who can in future only hoard his money at the largest Swiss bank for a penalty fee and why an even more radical approach is out of the question for most banks.
UBS no longer wants to be a parking lot for large amounts of cash. The big bank made this clear on Tuesday as part of a media communication offensive. The amount for cash deposits free of penalties will be reduced from the current two million francs to just 250,000 francs on July 1.
“The measure is also intended to prevent cash from being parked free of charge,” a press spokesman explains the decision. The existing clientele should be spared as much as possible. For example, customers with a mortgage receive an additional allowance of CHF 500,000.
Few customers affected
There is also more leeway for customers who have invested at least part of their assets in products from which the bank can earn money. These include UBS investment funds. It is assumed that significantly less than five percent of the currently around 2.4 million customers of UBS Switzerland will be affected, says the spokesman.
In addition to the deterrent effect for unwelcome new customers with large cash holdings, UBS hopes that the stricter charging of negative interest will also result in a change in behavior within its own clientele. The outgoing UBS Switzerland boss Axel Lehmann speaks in an interview with the NZZ of an “opportunity” for the bank. A “strategic heavyweight” are prevention issues.
In fact, the bank gets at least the chance to earn money if customers invest more of their savings in investment funds, stocks or in pillar 3a products. Ideally, the bank earns twice: First, by having to keep less cash in the National Bank’s current account, where it has to pay the penalty interest of -0.75 percent. And secondly, by being able to charge customers additional custody fees and commissions for new securities investments. The UBS spokesman does not provide any information on the financial benefit that UBS expects to gain from passing on negative interest rates.
Free cash parking has become even rarer in the wake of the pandemic than it was before, says Herbert Kumbartzki, CFO of Basellandschaftliche Kantonalbank. “The excess liquidity in our financial system has increased massively since March of last year,” he says. At the end of October, the balance of current accounts of domestic commercial banks at the National Bank was CHF 637 billion. Of this, around 150 billion francs are likely to be subject to a penalty interest rate, although the National Bank has already increased the exemption limit for sight deposits free of penalty interest two times.
«No signal effect»
Kumbartzki believes that the UBS decision will soon lead to increased demand for free cash parking spaces in Liestal as well. But even at the state institute there is hardly any capacity left for large amounts of cash, although the allowance at the Basellandschaftliche is still one million francs. “We have to go to the pain limit in order to spare our existing customers the negative interest burden,” says the CFO.
At least for the time being, Kumbartzki does not believe in the big slump, which could soon lead to the large majority of smaller customers with cash assets of less than 100,000 francs being asked to pay. The savings of these customers are all too important for the refinancing of the banks’ lending business to be able to afford the risk of withdrawing customer funds on a large scale. “UBS’s decision has no signal effect for mass business,” believes Kumbartzki.
At the same time as the information about the passing on of negative interest rates, UBS confirmed the closure of 44 branches in the branch network currently still comprising 239 units in Switzerland. Around 150 employees are affected by the measure, but according to a spokesman, they are all still employed at the moment.