The Swiss National Bank is losing the argument over negative interest rates. The results of a UBS company survey show just how unpopular the bank’s monetary policy has become.
Two out of three entrepreneurs believe that the costs of negative interest outweighed their benefits. The verdict from a survey of 2,500 entrepreneurs in Switzerland conducted by UBS shows just how controversial negative interest rates have become since their introduction five years ago.
A majority of the businesspeople are not directly affected by negative interest and a minority only must pay a penalty on liquidity they hold at their bank, UBS said.
Liquidity Penalties for More Clients
This is about to change though. Postfinance, one of the biggest providers of banking services for businesses, on Thursday confirmed a report by Swiss Television «SRF», saying that the threshold from which it demands a penalty for liquidity will be lowered from half a million Swiss francs (about half a million U.S. dollars) to 250,000 francs.
In reality, the lower threshold means that even non-profit organizations will be asked to pay a penalty for holding large amounts of cash on their accounts.
The Pension Fund Crunch
Most respondents in the UBS survey showed themselves indifferent to the effects of negative rates on their own business. The reason why they believe that the costs outweigh benefits are to be found in the effect they have on the financial situation of occupational pension plans and on savings accounts. Most banks pay hardly any interest on savings accounts.
The respondents are also concerned about real estate prices. The number of empty apartments in peripheral locations have risen in recent years following a boom in the construction of residential property. Real estate still yield a steady return and hence are viewed as attractive investment opportunities.
Even Exporters Grow Wary
Last week, the head of the SNB, Thomas Jordan, told an audience of pension experts why the bank had kept the emergency measure of negative rates in place for so long. The Swiss francs would appreciated if the bank were to lift the rate, he explained. If the franc were to rise again, Swiss economic growth would be hit, with higher unemployment as a consequence. This in turn would also affect pension funds.
Even if his explanation sounds logical enough, he seems to have lost his audience. Of the 2,500 people surveyed, about 500 are in charge of typical exporters and hence intrinsically interested in a weaker franc. But even a very sizeable number of exporters have become critical of negative rates: «What is remarkable, however, is that a majority of companies who generate over 50 percent of their business from exports believe that negative interest rates are harmful to the Swiss economy overall – especially because no end is in sight with regard to the situation at hand,» said Daniel Kalt, chief investment officer at UBS Switzerland.
