Credit Suisse to charge wealthy for Swiss franc holdings

[ZURICH] Credit Suisse Group AG plans to impose charges on more wealthy clients as it prepares to spread the pain of negative interest rates.

The bank expects to start charging for Swiss franc deposits after imposing a 0.4 per cent fee on euro accounts of more than one million euros (S$1.5 million), according to a person with knowledge of the matter. Credit Suisse plans to inform private banking clients of the franc deposit charges in the autumn, the person said, asking not to be identified because the matter is private.

Swiss rival UBS Group AG has already said it will introduce negative rates for clients holding more than 2 million francs ($2 million).

Swiss banks are looking to mitigate the costs of deepening negative rates, which result in them paying to park their excess cash with both the European Central Bank (ECB) and the Swiss National Bank. The SNB, which kept its rate unchanged at minus 0.75 per cent on Thursday, said it will exempt more of banks' reserves from charges because of expectations that the global low rate environment will persist.

Swiss lenders, many of them focused on wealth management, have to weigh the prospect of continuing to lose money on the cash deposits against imposing fees that could prompt some of their most valuable customers to jump ship. CEO Tidjane Thiam told reporters on July 31 that Credit Suisse was considering measures on deposits to mitigate the pressure of negative interest rates.

Credit Suisse shares traded 1.6 per cent higher in Zurich, making it the biggest gainer in the benchmark Swiss Market Index.

Like the Swiss central bank, the ECB is also taking steps to soften the blow on lenders. It plans to exempt a portion of banks' cash deposits from charges under a system known as tiering and is offering free long-term loans.

UBS Group AG plans to charge its Swiss clients an annual fee of 0.6 per cent on deposits of more than 500,000 euros. The fee previously kicked in at one million euros.

Nordic lenders

Swiss lenders are not the only ones feeling the pinch. Some banks in Scandinavia already have begun charging retail customers to deposit money, after imposing fees on businesses for several years. That includes Danish banks Jyske Bank A/S and Sydbank A/S. Both set the threshold last month at 7.5 million kroner (S$1.5 million) as Denmark's Central bank looked ready to go even lower than the world record -0.75 per cent rate it shares with Switzerland. Sweden also has a negative rate at -0.25.

BLOOMBERG