A number of Swiss banks introduced negative interest rates for businesses and wealthy private banking customers in 2015.
On April 1, 2015, the Alternative Bank became the first Swiss bank to impose negative yield rates on a checking account. However, the negative rates only applied to accounts which held deposits of 100,000 francs or more.
But that is about to change. Starting on January 1, 2016, the Alternative Bank will apply a negative yield rate of -0.125% to its Alltagskonto (Compte 7sur7) accounts with a balance of 100,000 francs or less. A negative interest rate of -0.75 will apply to account which hold larger amounts of deposits. The basic account fee is 36 francs per annum.
A 0% yield rate will apply to student accounts and savings accounts until deposits reach 100,000 francs, after which a -0.75% rate will apply. The bank’s 3a retirement account will still benefit from a positive yield rate (0.125%) as will its vested benefits account (0.025%). The new rates have already been integrated into the interactive moneyland.ch comparison tools.
Customers residing outside of Switzerland pay an additional 20 francs per month in fees.
The logic: The ongoing negative interest environment has been a bitter pill for the Alternative Bank which, as a sustainable bank, is funded primarily by interest margins. Rather than focusing on maximizing profits, the bank primarily provides loans to projects and businesses which it deems as socially and ecologically sound.
In all likelihood, the Alternative Bank’s approximately 33,000 customers know that they can earn higher yields at other banks which do not base their operations on sustainable principles. Because the bank appeals to a niche customer base, it is unlikely that the introduction of negative interest rates will lead to an outflow of customers. The fact that the bank refrained from inflicting negative interest rates on savings account customers with less than 100,000 in deposits will definitely work in its favor.
What does this mean for the Swiss banking scene as a whole? Will other banks impose negative interest rates on consumer account holders?
Customers of regular banks are likely to be a lot more critical of changes in their banks’ interest rates. In imposing negative interest rates on bank accounts for regular customers, banks would cross a psychologically significant line in the minds of Swiss customers. Benjamin Manz, CEO of moneyland.ch, believes that “the chance of negative interest rates, as such, being imposed on regular Swiss savers is unlikely”.
Continuously increasing fees and charges for various bank charges, such as account fees, is a better marketing approach which still achieves the desired effect. However, account fees are often waived for savings accounts (the Berner Kantonalbank has done this for years). “Still, Swiss bank customers should carefully follow increases in bank fees and charges” says Manz.
In addition to mortgages, other financial services affected by higher fees include credit cards, checking accounts, business accounts and custody services.