Swiss Negative Rate at ‘Pain Threshold’, Pictet Chief Tells FAZ

(Bloomberg) -- The Swiss National Bank’s negative interest rate of minus 0.75% is at a “pain threshold” and a further rate cut to minus 1% could prompt savers to withdraw funds from their bank accounts and store cash at home, a senior Swiss private banker said.

“At some point people will withdraw and hoard cash,” Pictet Group Senior Partner Renaud de Planta told German daily Frankfurter Allgemeine Zeitung in an interview. “That’s when monetary policy becomes completely ineffective. I don’t understand what central banks expect from those interest rate cuts. In the end, it’s simply a currency war. It becomes more pointless the longer it takes.”

De Planta also said that while Pictet makes money from charging clients fees for its services, commercial banks faced a “dangerous” situation. “In an environment of permanently negative rates, savings banks and commercial banks lose the reason for their existence.”

Switzerland has the world’s lowest benchmark policy rate at -0.75%. Last week, SNB Governing Board Member Andrea Maechler said the central bank’s ultra-loose monetary policy is vital because of the high value of the Swiss franc. If the European Central Bank cuts interest rates on September 12, the SNB is expected to follow with its own reduction at the next policy meeting on September 19.

To contact the reporter on this story: Jan Dahinten in Zurich at jdahinten@bloomberg.net

To contact the editors responsible for this story: Jan Dahinten at jdahinten@bloomberg.net, Corinne Gretler

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