London (CNN Business)Instead of paying interest on deposits, Swiss banks are starting to charge wealthy customers to stash their cash.
Credit Suisse (CS) said Friday that the bank would apply a negative 0.75% interest rate to balances above 2 million Swiss francs ($2 million). This means that if an individual client or business holds 3 million Swiss francs ($3 million) with the bank for one year, they would be charged a fee of 7,500 Swiss francs ($7,600).ECB cuts interest rates and relaunches its bond-buying programFor business customers holding more than 10 million francs ($10.1 million), the levy on funds above that mark rises to 0.85%. The change goes into effect for corporate customers on November 15, and for individuals on January 1.The unusual policy is the result of historically low interest rates. Negative rates, which have been in effect in Switzerland since 2015 and the 19 countries that use the euro since 2014, are meant to encourage borrowing and stimulate the economy. But the extraordinary monetary policy has been a burden on the region’s banks, making it much harder for them to generate profit on loans and mortgages, and forcing them to pay to park excess reserves at central banks.Read MoreWith no end to negative rates in sight, frustrated Swiss banks are passing some of the pain to their most affluent customers.UBS (UBS), which introduced deposit fees for large corporate clients in 2015, said in July that it would apply a similar approach. A 0.75% fee on cash balances above 2 million francs ($2 million) held in Switzerland will take effect in November. The bank will also lower the threshold for its 0.6% fee on euro balances to holdings above €500,000 ($557,000), down from €1 million ($1.1 million).”Conditions in money and capital markets remain very challenging,” UBS said in a statement on the move.Christine Lagarde, who takes the reins of the European Central Bank at the same time many of these policies go into effect, has said that euro area citizens would be “worse off” without negative interest rates. But she’s promised to monitor their “adverse side effects” as ECB president.