PostFinance customer asset fee (Guthabengebühr)

I know what you’re aiming at, but you know this is not the reason. It used to be that banks paid you a few % per year for being able to hold your money. If booking a position in the system was such a drag, then they would not have paid you to send them money. So the cost is purely dependent on the interest rate set by the central bank. But I need a memory refresh as to why a million in a private account is such a problem for the bank?

But why does it “have” to match it? If it does, then why is there a fee-free threshold, that varies from bank to bank?

Regarding the 2nd question: they are testing the market by lowering progressively the threshold.
Do you know the boiling frog fable?

Each bank also has a threshold, which is at CHF 10 million or 20 times of their reserve requirement from 2014, whichever is higher, if I understand correctly. Above that threshold they have to pay 0.75% p.a. to the SNB.

If a bank is above the SNB threshold and doesn’t collect any negative interest from their customers, the 0.75% is eating into their profit, and any additional money customers deposit is costing them 0.75% p.a. (if they can’t use it for anything).

The interest rate of credits is also lower than before the negative interest rate era, reducing the profit of banks. And the increased money supply means that there may be more money than the bank needs for credits and investments, hence they have to park it at the SNB.

I’ve read that in Germany some banks collect more negative interest from their customers (in total) than what they have to pay the ECB. Other banks pay more than they collect. I don’t know the balance of interest payment to SNB vs. collecting interest from customers at Swiss banks.

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(My vague understanding at a high level)

In general the key thing is that a bank needs to have

  1. balanced books (they can’t store excess cash, it has to be deposited somewhere)
  2. capital requirements matching the risk of it’s assets (risky loans are discounted

So at the end of each day, any bank with surplus capital will need to put it somewhere overnight (it should be a very high quality loan, with almost no risk of default). The BNS (but similarly other central banks for other currencies) drives the rate of that overnight lending (but afaik there are other dealers though as a major liquidity provider the central bank is typically able to target any rate).

I think searching for repo/reverse repo might give pointers to have more details.

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So what you’re saying is that each bank regularly (daily?) reports its balance sheet to the SNB and it’s a regulatory requirement that if their CHF balance exceeds some threshold, then they have to make a sight deposit at the SNB, with an interest rate of -0.75%?

If that’s the case then indeed the banks which can issue mortgage loans are at an advantage, because they can get rid of this money and even make a positive interest. And can PostFinance do with this money?

So in a way, the central banks charge a fee for simply owning their fed-coins and snb-coins. They know who owns the money, because it’s all digital. So if all money was digital and we had true deflation on the currency, the way to still make it less attractive to hold money would be to set a highly negative interest rate.

Only partially. You don’t want to lock cash (which you can withdraw tomorrow) into a 10 year mortgage. You could get into some serious liquidity issues that way. But there is the “Bodensatztheorie”, don’t know the english word for it.

Anyway, from an purely economic viewpoint we should pay negative interest to banks for anything above 0 CHF.

No - they paid you a few percent per year to be able to lend (or invest) your money.
At higher rates than they used to pay out. Making money from the difference (or interest rate “spread”).

The reserve and capital requirements have already been mentioned.

Yes. Of course mortgage interest rates are currently quite low too - but the bank still has to make money from the interest rate spread. However, they can’t just lend unlimited amounts. Also, mortgages aren’t risk-free - they carry a risk of the borrower defaulting.

…unless consumers still prefer to save - and react to that by increasing their savings.

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Yes, except they seem to have forgotten I have a mortgage with them (got a letter today saying that my threshold is 100k, even though it should be 350k). Maybe I can stop paying interests then? :slight_smile:

Well, I just opened another bank account at Raiffeisen to get the museum pass, I will most likely just move some money there.

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Frankly I would never lend my money to a bank or other party which did not pay me for it, and would never even consider paying an entity to owe me assets. I would defnitely keep my money in cash before paying someone to owe it to me, if those were the only choices. You can easily hold a million francs in 1000-franc notes in a bank safe deposit box which costs 50 francs per year (0.005% negative interest as opposed to 0.75%).

There are plenty of Swiss banks which do not charge negative interest, so why not just up an move your assets?

I find small regional banks are generally much more favorable. This likely has to do with the SNB negative interest rate exemptions for up to certain amounts of required cash reserves. My bank even pays me some interest on the balance of my private account, and relatively good interest on savings account balances.

PostFinance is kind of between a rock and a hard place because it cannot engage in many of the money-generating activities which commercial banks engage in to offset the cost of the SNB’s negative interest.

You can also keep your money at several different banks. That won’t just help you avoid negative interest, but it will also maximize the benefit of the depositor protection scheme and diversify risk.

There is also the option of holding short-term interest-bearing bonds or medium-term notes in place of part of your cash.

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In general, 100k should be enough liquidity for most people. I just hope it doesn’t go down to 25k or 10k. Then I would have to invest my income instantly and rely on credit cards for short term liquidity.

Why, what are you up to?

So far we’ve only seen the devastation that the Cortana effect brings to the stock markets, but saving accounts have been safe! Are planning to buy bank shares?

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If central banks want to enforce a full-out negative interest rate policy (NIRP), then that could happen. If, by then, there’s something like a “crypto-franc”, one couldn’t even move to solid cash in a bank deposit. But I think and hope that we’re far away from such a situation.

100k might not be enough if you are saving (and searching) for a property

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OK, but realistically you will have some pillar 2 and 3, your partner too. The rest you can spread over 2-3 banks without much additional work. 100k is still manageable. But with only 10-25k this would become a challenge. I guess in a World where you can’t hold local currency at no cost, you would have to take a risk and invest this money, maybe in an asset correlated with real estate market (like local REITs).

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Any PF client who is not a US citizen (and hence, qualify) should open a second account with Neon if they have more than (or close to) 100K. It is a no brainer.

I just wish that I had that option. I guess it is finally time to open a “real” bank account with UBS or something.

PF has already substantially raised the cost for having an account by raising their account fees (which used to be free not too long ago). This goes a long way towards covering costs attached to an account with less than 50k. Trying to recuperate the full costs in this range will cause a big drama. So, I don’t think they are going to lower the threshold below that in the foreseeable future. They are better off by making small incremental rise in fees and cutting back on services.

True. Smaller thresholds just lead to people moving their money around, so in most cases no increase in profits.

I have 550 clients and only one of them (due to age) doesn’t care about it and is willing to pay negative interest. All others reallocated it.

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Next step for banks is to reduce further the withdrawal conditions…

True, and that’s exactly what I’d do as well. But if clients re-allocate, the bank probably does get rid of unwanted client cash holdings on a net basis. So, no increase in revenues, but a decrease in costs. And I am sure some are tempted and invest instead of holding cash, so there should be at least some increased revenues due to increased client investments.

At the moment reallocation is still easy. With several bank accounts (and IB) you could easily hold several 100k in cash.

What segment do you cover? 1M plus?

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