Swiss central bank makes 388 million from negative interest rates

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The Swiss National Bank (SNB), Switzerland’s central bank, has earned CHF 388 million from negative interest rates since introducing them in 2014 to tame the rising strength of the Swiss Franc, according to the newspaper SonntagsBlick.

On 15 January 2015, the SNB announced that it was abandoning its policy of maintaining an exchange rate cap of 1.20 francs to 1.00 euro. At the same time it increased negative interest on sight deposits from -0.25% to -0.75%.

On one hand negative interest rates are beneficial. They generate additional income for the SNB, some of which finds its way to cantonal governments, while reducing the cost of servicing government debt. In addition, they help exporters by putting downward pressure on the Swiss franc and help to nudge inflation up to more normal levels.

On the other hand they hurt savers. Despite few banks passing on negative rates to retail customers, some are describing them as a tax because of their negative effect on pension funds.

About Investec

Investec is a distinctive Specialist Bank and Asset Manager. We provide a diverse range of financial products and services to a niche client base in three principal markets, the United Kingdom, South Africa and Australia, as well as certain other geographies. Investec’s strategic goals are motivated by the desire to develop an efficient and integrated business on an international scale through the active pursuit of clearly established core competencies in the group’s principal business areas.

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