Swiss bank UBS is set to become the latest bank to start charging wealthy private clients for some euro deposits, in the latest sign of the strain low benchmark interest rates are imposing on the financial services industry.
The 0.6 per cent charge on deposits over €1m will begin in May, and will bring these customers into line with private clients’ Swiss franc deposits, and with accounts held by corporate and institutional clients.
In a statement, the bank said:
We are striving to find solutions and are working closely with all affected clients to avoid incurring such deposit fees. This charge reflects the increasing costs seen across the industry of re-investing cash from deposits in money and capital markets, the continued extraordinarily low (negative) interest rates in the euro area and increased liquidity regulations.
The European Central Bank first took its deposit rate below zero per cent in mid-2014. Now, the rate stands at -0.4 per cent, still somewhat above the Swiss central bank’s sight deposit rate of -0.75 per cent.
The ECB is showing early signs of considering how and when it might raise deposit rates, and investors are starting to price in a rise as soon as this year. The central bank’s willingness to cut rates further, particularly given the widely-acknowledged problems that negative rates cause, is certainly declining. But any shift remains a still distant prospect.