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Swiss banks paid SNB more in negative rates in 2016

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02/21/2017 | 12:33 pm
ZURICH (Reuters) - Commercial banks paid more to park cash at the Swiss National Bank in 2016, as the central bank's currency interventions inflated their deposits with the SNB and generated more charges in the form of negative interest rates.

Data published by the SNB on Tuesday showed banks' total sight deposits at the central bank were 465.09 billion Swiss francs (371 billion pounds) based on average daily figures in December 2016, some 15 percent higher from a year before.

Since January 2015 the SNB has charged banks with Swiss licenses 0.75 percent on deposits held at the central bank which exceed 20 times the lender's minimum reserve requirement.

Deposits subject to negative interest rates rose by roughly 30 percent over the course of 2016, according to Reuters calculations.

Negative interest rates and currency interventions are the SNB's two-pillared approach to reduce the franc's attractiveness and stem inflows to the safe-haven currency.

Sight deposits are seen as a guide to the central bank's intervention in foreign currency markets. To weaken the franc against the euro <EURCHF=>, the SNB buys euros and credits the corresponding franc value to banks' SNB accounts.

While holdings subject to negative rates rose across all three banking categories listed by the SNB, it was particularly pronounced for Switzerland's two biggest banks, UBS (>> UBS Group AG) and Credit Suisse (>> Credit Suisse Group AG).

In 2016, sight deposits held by the two jointly rose nearly 36 percent, while their combined average of deposits subject to negative interest rates quadrupled compared to 2015.

Until June 2015, the two big banks' combined deposits had fallen below the exemption threshold.

The SNB generated 1.1 billion Swiss francs from negative interest charged to banks and other deposit-holding institutions in the first nine months of 2016, just below the 1.2 billion francs generated for all of 2015.

While the SNB has not yet given a figure for how much it pocketed from the charge in full-year 2016, analysts estimate the figure to be around 1.5 billion francs.

(Editing by Catherine Evans)

By Angelika Gruber and Brenna Hughes Neghaiwi

© Reuters 2017
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