A small Swiss bank has become the first retail bank in the world to charge ordinary customers negative interest on their cash deposits.
From next year, Alternative Bank Schweiz (ABS) will charge current account holders 0.125% a year to hold money with it, while those who have more than CHF100,000 (around £65,000) will have to pay 0.75%.
ABS argues that it needs to do this because the Swiss central bank (the Swiss NationalBank) is charging it 0.75% to deposit money. Central banks in Denmark and Sweden have also set negative deposit rates, as has the European Central Bank (ECB).
The idea behind negative rates is to encourage people and firms to go out and spend, rather than pay the penalty for saving. So far, other Swiss banks have avoided passing negative rates onto their retail customers directly (though some levy negative rates for large clients). Instead, they have increased account management charges (Swiss banks do not provide “free” banking) or absorbed the losses directly. However, ABS – which funds “ethical” projects – argues that negative interest rates are more honest.