Monetary policy assessment of 19 September 2019
Central bank: snb | Type: statement | Date: 2019-09-19

Monetary policy assessment of 19 September 2019
unchanged and adjusts basis for calculating negative interest on
sight deposits at SNB
SNB at −0.75%. It remains willing to intervene in the foreign exchange market as necessary,
while taking the overall currency situation into consideration. Furthermore, the National Bank
is adjusting the basis for calculating negative interest on sight deposits at the SNB.
The expansionary monetary policy continues to be necessary given the latest international
developments and the inflation outlook in Switzerland. The situation on the foreign exchange
market is still fragile, and the Swiss franc has appreciated in trade-weighted terms. It remains
highly valued.
Negative interest and the willingness to intervene are important in order to counteract the
attractiveness of Swiss franc investments and thus ease pressure on the currency. In this way,
the SNB stabilises price developments and supports economic activity.
The SNB is adjusting the basis for calculating negative interest as follows. Negative interest
will continue to be charged on the portion of banks’ sight deposits which exceeds a certain
exemption threshold. However, this exemption threshold will now be updated monthly and
thereby reflect developments in banks’ balance sheets over time.
This adjustment to the calculation basis takes account of the fact that the low interest rate
environment around the world has recently become more entrenched and could persist for
some time yet. The adjustment raises the exemption threshold for the banking system and
reduces negative interest income for the SNB. The new exemption threshold calculation
comes into effect on 1 November 2019.
Zurich, 19 September 2019
Press release
The SNB regularly reviews the basis for calculating negative interest and adjusts it as
necessary, in order to ensure room for manoeuvre in monetary policy going forward. The
negative interest charge is to be limited to what is necessary, however. More information on
the calculation of the exemption threshold can be found in the attached instruction sheet.
The new conditional inflation forecast is lower than in June. This is primarily due to weaker
growth and inflation prospects abroad and the stronger Swiss franc. The forecast for the
current year has been reduced slightly to 0.4%, from 0.6% in the previous quarter. For 2020,
the SNB now expects an inflation rate of 0.2%, compared to 0.7% last quarter. The inflation
rate increases to 0.6% in 2021; in the previous quarter, a rise to 1.1% had been forecast. The
conditional inflation forecast is based on the assumption that the SNB policy rate remains at
–0.75% over the entire forecast horizon.
Global economic signals have deteriorated in recent months due to heightened trade tensions
and political uncertainty. Economic growth around the world slowed in the second quarter,
and manufacturing output has since been showing signs of weakening. The economic
slowdown is being accompanied by subdued capital spending and a decline in the global trade
in goods. Employment growth in the advanced economies was also slower than in previous
quarters. In light of the heightened economic risks and modest inflation dynamics, various
central banks have adjusted their monetary policy stance and lowered their key rates.
In its new baseline scenario for the global economy, the SNB is revising down its growth
forecast for the coming quarters. Over the short term, international momentum is likely to be
modest. However, in the medium term the SNB expects the global economy to pick up again,
not least due to monetary policy easing measures. Inflation is then expected to rise again
gradually.
Risks to the global economy remain tilted to the downside. Chief among them are still
political uncertainty and trade tensions, which could lead to renewed turbulence on the
financial markets and a further dampening of economic sentiment.
The Swiss economy continued to grow at a moderate rate in the second quarter.
Developments on the labour market also remained positive. Employment figures continued to
rise, and the unemployment rate remained stable at a low level.
The deterioration of the international economic environment will likely cause growth to
weaken temporarily. The SNB expects growth of between 0.5% and 1% for 2019 as a whole,
compared to around 1.5% in June. The forecast adjustment is largely attributable to the fact
that GDP growth rates for the second half of 2018 and the first quarter of 2019 were revised
downwards.
Imbalances persist on the mortgage and real estate markets. Both mortgage lending and prices
for single-family homes and privately owned apartments continued to rise slightly in recent
quarters, while prices in the residential investment property segment declined somewhat.
Nevertheless, due to the strong price increases in recent years and growing vacancy rates there
is the risk of a correction in this segment in particular. The SNB therefore welcomes the latest
Zurich, 19 September 2019
Press release
revision of the self-regulation guidelines for banks in the area of investment properties. It will
continue to monitor developments on the mortgage and real estate markets closely, and will
regularly reassess the need for an adjustment of the countercyclical capital buffer.
Valid from 1 November 2019
This is an English translation of a German original.
Only the German original text is authoritative and legally binding.
Department III
Zurich, 19 September 2019
Instruction sheet governing negative interest on sight deposit
account balances
1. General
(cf. section 3 below) on sight deposit account balances (cf. section 2), once the sight deposit
account balance exceeds a certain exemption threshold (cf. section 4).
2. Scope of application
Negative interest is charged on sight deposit account balances denominated in Swiss francs.
The central Federal Administration and the compensation funds for old age and survivors’
insurance, disability insurance and the fund for loss of earned income (compenswiss) are
currently exempted.
3. Negative interest
The negative interest rate currently corresponds to the SNB policy rate. Changes in the rate
will be announced by the SNB. The applicable interest rate on sight deposits is available at
(current).
Negative interest is calculated on a daily basis according to the Actual/360 convention
customary in the money market. It is debited at the end of each month for the interest period
of the previous month (cf. section 5). Unless otherwise specified, a change in the negative
interest rate will apply with immediate effect, and the affected sight deposit account balances
will be subject to the new interest rate on the day of the announcement.
Attachment
Valid from 1 November 2019 19 September 2019
Instruction sheet governing negative
interest on sight deposit account
4. Exemption threshold
Negative interest is charged only on the portion of the sight deposit account balance which
exceeds a certain threshold (exemption threshold).
The exemption threshold applies to each individual sight deposit account holder and shall be
at least CHF 10 million.
Should a sight deposit account holder, in exceptional circumstances, hold more than one sight
deposit account at the SNB, the threshold only applies once to the aggregate balance of all
relevant accounts.
There are two methods:
Method 1: Minimum reserve-based1 threshold
For sight deposit account holders subject to minimum reserve requirements (domestic
2): The exemption threshold is calculated as a basis component minus a cash holdings
component. The basis component corresponds to the moving average of the minimum reserve
requirements over the preceding 36 reference periods (RPs), multiplied by the applicable
threshold factor. The last RP, i.e. RP 36, is considered to start on the 20th calendar day three
months before the beginning of the respective interest period.3 The cash holdings component
corresponds to the cash holdings reported in this last RP.
releases, Interest rates and foreign exchange rates (current). Changes in the threshold factor
will be announced by the SNB. Unless otherwise specified, a change in the threshold factor
will apply as of the beginning of the subsequent interest period.
The threshold, comprising a basis and a cash holdings component according to method 1, is
therefore calculated as follows:
rthermore, under method 1, the threshold shall not be less than the basic minimum reserve
requirement of the last RP.
1 Minimum reserves as defined by the National Bank Ordinance (arts. 12 –17 NBO).
2 Banks as defined by the Federal Act on Banks and Savings Banks.
3 For example, the last RP for the November interest period is 20 August–19 September.
Moving average of minimum reserve requirements over the last 36 RPs
multiplied by a threshold factor (basis component)
− Cash holdings in the last RP (cash holdings component)
= Exemption threshold
Attachment
Valid from 1 November 2019 19 September 2019
Instruction sheet governing negative
interest on sight deposit account
Method 2: Fixed threshold
For all other sight deposit account holders not mentioned under method 1, the SNB sets a
fixed threshold.
5. Calculation, debit and notification
Negative interest is calculated on a daily basis on the portion of the sight deposit account
balance which exceeds the exemption threshold at the end of each calendar day. This applies
analogously for the aggregate balance of an account holder with several sight deposit
The negative interest charge for the interest period of the previous month is debited from the
sight deposit account on the last value date of each month (reference date). If the sight deposit
account holder has more than one sight deposit account, the SNB decides which of those
accounts is to be debited (main account). The SNB is authorised to debit the account without
prior notice.
The sight deposit account holder must ensure that the main account has sufficient cover on the
reference date for the debit of the negative interest.
Debiting the negative interest triggers a sight deposit account transfer by the SNB for Swiss
Interbank Clearing (SIC) system participants.
On the reference date, the sight deposit account holder is notified that the negative interest has
been charged by the following: account statement via SWIFT (MT950) or physical statement
for the main account plus a separate debit notice via SWIFT (MT900), or physical notice. In
addition, the sight deposit account holder will receive a physical interest calculation statement
detailing the basis for calculation of the negative interest.
6. New incorporations, changes to legal structures and
transformations
In the case of new incorporations, changes to legal structures and transformations (mergers,
demergers or transfers of assets), for sight deposit account holders whose threshold is
calculated according to method 1, the principles set out below shall apply when determining
the minimum reserve positions (minimum reserve requirements and cash holdings) for the
exemption threshold calculation. These positions are used to calculate the threshold for all
interest periods which follow a new incorporation, change to legal structure or transformation
and are relevant for calculating the exemption threshold (cf. section 4).
New incorporations
For the RP preceding the incorporation, the values of the positions of the first minimum
reserve report following incorporation that are relevant for the calculation of the threshold are
applied retroactively to the RP preceding the incorporation.
Attachment
Valid from 1 November 2019 19 September 2019
Instruction sheet governing negative
interest on sight deposit account
For the RP preceding the merger, the values of the positions of the minimum reserve report of
each bank involved that are relevant for the calculation of the threshold are aggregated.
For the RP preceding the demerger, the values of the positions of the minimum reserve report
of the banks involved that are relevant for the calculation of the threshold are divided
proportionately. The proportionate allocation for the basis component is made using the ratio
of the first minimum reserve requirement values reported by each bank involved following the
demerger. For the cash holdings component, the corresponding ratio of the cash holdings is
calculated.
Transfers of assets
Transfers of assets as per the Merger Act or Code of Obligations which result in a change in
the minimum reserve requirements may be taken into account by the SNB in calculating the
basis component. In all cases, this requires a joint written application from the banks
involved. In addition, any adjustment must always be made for both banks.
Attachment