SNB key interest rate hike: First banks reduce negative interest rates

On June 16, 2022, the Swiss National Bank (SNB) surprised the public by raising its key interest rate by half a percentage point from -0.75 to just -0.25 percent. Many commentators see this as an extraordinary event: "This is the first time in 15 years that the SNB has raised the key interest rate," says Benjamin Manz, CEO of moneyland.ch, a Swiss online comparison service for banks, insurance companies and telecoms. Does this key interest rate increase automatically mean less negative interest on savings and business accounts?

Key interest rate increase greater than expected

The move was basically to be expected, but the SNB intervened surprisingly early, as analyst Felix Oeschger of moneyland.ch says. In addition, the increase was larger than many market observers had initially expected.

The increase in the key interest rate favors a further rise in interest rates for many different financial products. These include medium-term notes and mortgages. However, the interest rate turnaround has already taken place for these products: Interest rates have been rising since the beginning of the year. The situation is different for savings and private accounts, as Oeschger explains: "So far, nothing has changed in the interest rates on bank accounts. If the SNB maintains its course, however, interest rates on savings and private accounts can also be expected to rise."

Less negative interest

The comparison service moneyland.ch has asked various banks how they are reacting to the SNB's decision. Several banks confirm that they will reduce the negative interest rates. UBS and Credit Suisse, for example, say they will also adjust the negative interest rates for both private and corporate customers by half a percentage point. Raiffeisen Switzerland also recommends that all Raiffeisen banks charge only 0.25 instead of 0.75 percent for negative interest in the future.

It is true that the SNB's interest rate change will already apply from June 17. The adjusted fees for private customers, on the other hand, will not come into effect at many banks until July 1, 2022. However, there are also exceptions: Zürcher Kantonalbank is reducing the negative interest rate at the same time as the SNB. At Postfinance, the adjustment is to be implemented for all private and business customers by July 1, 2022 at the latest. Large and institutional customers will be affected first.

Further interest rate hikes expected

The banks' answers show: Even if the charges are not yet history, customers affected by negative interest rates will be asked to pay significantly less in the future. However, negative interest will continue to be charged on banks' sight balances at the SNB if they exceed the exemption amount. "So the banks can still justify negative interest on customer accounts now - but if the SNB takes further interest rate steps, this argument no longer holds water," says Oeschger.

And it is safe to assume that this will not be the last interest rate hike by the SNB. Thomas Jordan, President of the SNB, already indicated when the current interest rate hike was announced that more could soon follow. Oeschger also believes that this is likely: "Because it is questionable whether inflation in Switzerland can be kept in check with today's key interest rate hike alone."

Source: moneyland.ch