Credit Suisse Informs Bank Clients of Negative Franc Rates

Credit Suisse Group AG (CSGN), Switzerland’s second-biggest bank, informed financial institutional clients that it will start imposing negative interest rates on cash balances held in Swiss francs, a bank official said.

Marc Dosch, a spokesman for the Zurich-based bank, declined to name the other currencies affected by negative rates. Credit Suisse said in the notice, distributed to bank clients via the Swift system today, that it will communicate the currencies involved, plus the thresholds and rates on an individual basis to those customers during the next five business days.

“Due to the current market situation and after closely monitoring the situation over the course of this year, we have decided to start applying negative credit rates on cash clearing accounts above a certain threshold” as of Dec. 10, according to a notice confirmed by Credit Suisse. “We invite our customers to keep cash balances as low as possible to avoid negative credit charges.”

State Street Corp. (STT) and Bank of New York Mellon Corp., two of the world’s biggest custody banks, have already disclosed plans to offer negative interest rates on francs and Danish kroner. Royal Bank of Canada is also imposing negative rates on some customers for those currencies. Depositors have turned to Denmark and Switzerland as they hunt for currencies with less risk than the euro, the fate of which depends in part on whether cash-strapped nations such as Greece can pay their debts.

Under Pressure

“It tells us that banks are still under heavy pressure to deleverage their balance sheets, as having a large amount of Swiss franc deposits is likely bringing far too little return for the amount of capital used,” Sebastien Galy, a New York- based foreign-exchange strategist at Societe Generale SA, said in a note.

The Swiss franc weakened the most in almost three months against the euro after the Credit Suisse comment on negative interest rates. The franc depreciated as much as 0.4 percent to 1.2097 per euro, the weakest since Sept. 13, and traded at 1.2088 at 5:01 p.m. in Zurich.

UBS AG (UBSN), Switzerland’s biggest bank, said it has been monitoring the development of cash balances maintained in current accounts of its third-party bank clients since August 2011 and levying charges in some instances.

“In cases where we see net inflows in cash clearing accounts above a certain threshold, we continue to take corrective action, by means of a temporary excess balance fee,” the Zurich-based bank said in an e-mail. “We encourage our bank clients to keep their balances in cash clearing accounts as low as possible.”

Walter Meier, a spokesman at the Swiss National Bank, declined to comment.

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net