SNB alters excess deposit interest rate threshold

The Swiss National Bank (SNB) will lower the threshold factor for remunerating sight deposits, reducing it from 25 to 22 times the minimum reserve requirement.

This adjustment, announced on Monday, modifies how much interest banks earn for holding excess cash with the central bank.

The change partially reverses a July increase in minimum reserve requirements that had previously raised the threshold for earning the full interest rate of 1.25 per cent.

Currently, deposits above this threshold earn interest at the SNB’s policy rate, discounted by a half-point to 0.75 per cent.

According to Raiffeisen Switzerland economist Alexander Koch, Monday’s adjustment is unlikely to significantly impact overall interest earnings but may signal further reductions in the future.

Last month’s increase had already led to an estimated annual revenue loss of about 300 million francs ($350 million) for Swiss banks.

The SNB stated that the new measure aims to ensure effective monetary policy implementation and support an active money market, with no effect on the current monetary policy stance.

Attribution: Bloomberg

Subediting: M. S. Salama