SNB Limits Negative-Rate Account Exemptions After Complaints

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The Swiss National Bank reduced the number of sight deposit accounts exempt from its negative interest rate following criticism that public institutions were being shielded from a punitive charge levied on the private sector.

The SNB enacted a negative deposit rate of 75 basis points in January, when it gave up its cap on the franc, to make holding franc-denominated assets less attractive. That fee didn’t apply to some sight deposit accounts at the SNB held by public entities, leading to complaints by some lawmakers about unequal treatment.

“Today’s announcement reducing the exceptions was made not principally due to monetary policy imperatives but on grounds of equal treatment,” SNB spokeswoman Silvia Oppliger said.

As of May 1, the negative rate will apply also to the accounts held at the SNB by entities such as the pension funds of the federal government and the central bank, it said in a statement on Wednesday.

SNB President Thomas Jordan said on March 19 that there was a review under way on which sight deposit accounts would be exempt, with a view to reducing the number of exclusions to prevent circumvention of the negative rate.

The SNB’s decision not to exempt health insurance companies from the negative rate meant those paying premiums would have to foot the bill for an additional 10 million francs to 12 million francs ($12.5 million) per year, industry association Santesuisse said in March.

‘Bad Blood’

“It’s not a nice thing when the private pension funds suffer from a measure and the public ones are exempt,” said Alessandro Bee, a strategist at Bank J Safra Sarasin Ltd. in Zurich. “That just creates bad blood.”

SNB sight deposit accounts of the City of Zurich, as well as the cantons of Geneva and Zurich, will be dissolved, the central bank said, adding that the three accounts “had scarcely been used in recent times.”

“We use it for the coins we take in from ticket vending machines for public transport,” said Patrick Pons, a spokesman for the city of Zurich’s department of finance. “We’re looking for alternatives.”

The canton of Zurich uses the account to deposit cash it takes in daily from “various public agencies,” said Hansruedi Bachmann, a spokesman for the canton’s department of finance. “We’ll now have to change our logistical processes,” he said.

For Geneva, this “won’t change anything as it’s a rarely used account,” said Roland Godel, a spokesman for canton’s department of finance.

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