Swiss Banks: Cash – What Else?

Alternative Investment Products

Thus, banks are in between what they view as an uncooperative central bank and clients demurring when asked to diversify out of cash. Banks have set up cash products – UBS, for example, offers a cash-like instrument based in Jersey to escape the charges. Effectively, wealth managers have failed to convince their well-heeled clientele to trust their investment advice.

The reasons for the failure are manifold: lingering trust issues in the wake of the 2008/09 financial crisis, foundering efforts to establish a credible asset management hub in Switzerland, wealthy investors' general mistrust of financial markets, and a general preference to maintain an ample cash pile. 

Unpopular Investment Options

A recent study exemplifies this: asked what they would do with if they were gifted $1 million, 64 percent of respondents in Switzerland said they would put it into a savings account. Just 23 percent said they would invest in active funds. Forty-four percent said they would reduce their workload.

Faced with a hidebound clientele, banks have little choice but to swerve between carrot and stick to try and get their customers back into markets. Geneva's Lombard Odier will begin charging for deposits of more than 1 million euros, if the funds aren't part of a mandate.

Retail Savers Exempt From Charges

Cash-like products may be exempt from franc charges, but they cost fees – and plenty of lenders, especially regional banks, don't levy any cash charges at all. Banks don't want to penalize their customers because they fear a sudden exodus of assets.

Zuercher Kantonalbank and Vontobel decide case-by-case whether they will pass on franc charges. Retail savers and small business will not pay to hold cash. The only Swiss lender to pass on the negative rate charges to clients is Olten-based Alternative Bank.