ZURICH--Credit Suisse Group AG will begin charging other banks
interest on Swiss franc deposits next week, becoming the first
major Swiss bank to impose negative rates in order to cope with
demand for the country's currency.
The Zurich-based bank, Switzerland's second-largest by market
value, will set negative interest rates on cash accounts, it said
in a statement Monday. The bank didn't indicate what the negative
rate might be when the policy goes into effect Dec. 10.
The policy applies only to interbank deposits, not to accounts
held by individuals.
"We invite our customers to keep cash balances as low as
possible to avoid negative credit charges," Credit Suisse said in
the statement sent via the Swift interbank payments system.
Credit Suisse's move comes as banks look for ways to cope with
surging demand for the franc, which has soared in value as global
investors seek a haven from the ongoing debt crisis in the euro
zone. Credit Suisse's move follows a decision by State Street Corp.
(STT) in October to levy charges on its Swiss franc and Danish
krone deposit accounts.
The Swiss National Bank, the country's central bank, declined to
comment on Credit Suisse's decision.
The SNB has struggled to control the value of the franc, cutting
interest rates to near zero in August 2011. A month later, the
central bank imposed a floor of 1.20 francs per euro to check the
appreciation of the franc in attempt to head off a recession and
help the country's exporters remain competitive.
Currency traders said Credit Suisse is likely trying to avoid
attracting franc funds because it has nowhere to invest the money
profitably. In fact, holding francs will likely cost Credit Suisse
money because of the costs of administering fresh deposits.
"It can park the money with the SNB," said Alessandro Bee, a
currency strategist at Bank Sarasin, "but it gets no interest
whatsoever."
The SNB hasn't imposed negative rates on deposits and maintains
a target rate of 0.0% on franc deposits. But commercial banks have
effectively paid negative rates on franc deposits for months
because Swiss inflation ran at an annualized 0.1% in October,
eroding the buying power of deposits.
Analysts say the Credit Suisse move is unlikely to choke off
demand for the franc, particularly as the end of the year looms.
Investors traditionally seek a safe haven like the franc to tide
them over the Christmas and New Year holidays.
The euro rose sharply versus the franc earlier, pushing it close
to 1.2090, though traders said the euro-zone currency had also
benefited from news that Spain has formally asked for European aid
to recapitalize its banking sector.
"It's one more thing that's going to make it easier for the SNB
to defend the peg," said George Dowd, who heads Newedge USA's
foreign-exchange trading desk in Chicago. "It decreases the
attractiveness of moving money to Switzerland. You can't be too
excited about being long Swiss franc."
Matthew Walter in New York contributed to this article.
Write to Neil MacLucas at Neil.MacLucas@dowjones.com
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