UBS Considers Passing Negative Rates to More Clients

(Bloomberg) --

UBS Group AG is considering whether to impose fees on a wider group of savers as it seeks to share the burden of negative interest rates.

The Swiss bank is approaching clients holding less than the 2 million Swiss francs ($2.1 million) about paying for their deposits, people with knowledge of the matter said, asking not to be identified discussing private talks. That’s the current threshold at which charges currently kick in at the lender.

Central banks around the world are reducing interest rates in response to slowing economic growth and the coronavirus outbreak. The Federal Reserve made an emergency interest rate cut of half a percentage point on Tuesday. Swiss banks are affected by both the European Central bank’s 0.5% negative rate and the Swiss National Bank’s minus 0.75% rate.

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“We are following developments closely and generally recommend that clients consider alternatives to cash,” UBS said in an emailed statement. “UBS still does not intend to charge negative interest rates to small savers or small businesses.”

UBS has so far set a relatively high bar for passing on the pain. Zurich-based rival Credit Suisse Group AG also charges clients with cash deposits of more than 2 million francs. Some retail lenders in Germany charge for deposits of more than 100,000 euros ($112,000) and Switzerland’s PostFinance AG sets the bar at more than 250,000 francs.

Negative rates were a main reason that UBS dropped its net new money target in January. UBS started a program this year to encourage clients to move out of cash into investments that are better protected from negative rates.

If depositors don’t want to make those changes, UBS will consider charges “and it’s possible that they move their cash elsewhere,” Chief Financial Officer Kirt Gardner said on a call with analysts in January. “We are working through the details of that program and will announce more within the first quarter.”

Moving clients into investments may have become a harder sell after stocks dropped the most since the financial crisis last week, hurting investment portfolios.

--With assistance from Nicholas Comfort.

To contact the reporters on this story: Marion Halftermeyer in Zurich at mhalftermeye@bloomberg.net;Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen

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