Switerland’s Alternative Bank Schweiz world’s first bank to apply negative interest rates to savers and charge them for deposits
A small Swiss bank has caused a stir, after becoming the world's first financial institution to apply negative interest rates to individual clients.
While a number central banks around the world have taken benchmark interest rates below the zero mark, individual savers had been shielded from this, meaning they weren't charged to keep cash in a bank account.
But the Alternative Bank Schweiz (ABS) sent a letter to its clients in mid-October, informing them of the charges on any cash deposited with the bank from the beginning of next year, according to a report by the AFP.
Current accounts will be slapped with a -0.125 per cent rate, while client deposits more than CHF 100,000 (£64,785) will be hit with a -0.75 per cent rate.
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"The decision on negative rates is costing us a lot of money – pretty much the equivalent of our entire annual profit last year," Martin Rohner, chief executive of ABS, told AFP.
The Swiss Central Bank took interest rates into negative territory last December to discourage investors from using the Swiss Franc as a "safe haven" and discouraging an influx of "hot money" into the country ahead of the European Central Bank's widely anticipated quantitative easing programme.
While some of the big banks such as UBS and Credit Suisse consequently applied negative interest rates to larger institutional clients.
While central bank interest rates don't immediately determine borrowing costs, they influence how much banks charge customers to borrow money.