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Report: Swiss banks' burden could halve due to new central bank rule

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Report: Swiss banks' burden could halve due to new central bank rule

The Swiss central bank's recent decision to increase the threshold for bank deposits exempt from negative rates could reduce the burden on local lenders by roughly CHF840 million annually from roughly CHF1.4 billion, Reuters reported, citing an analyst.

Credit Suisse economist Maxime Botteron estimated, based on incomplete data, that an additional of roughly CHF113 billion will be exempted from the Swiss National Bank's negative policy rate. In 2018, Swiss banks paid nearly CHF2 billion in negative interest rates, which were meant to reduce investor appetite for the Swiss franc, the report noted.

Switzerland's central bank on Sept. 19 left the policy rate and rate on sight deposits unchanged at negative 0.75% and said that the threshold for sight deposits exempt from negative rates will be raised and updated monthly. Under the new regulation, which takes effect Nov. 1, the amount local lenders will be able to store with the central bank before negative interest rates are applied will increase to 25x their minimum reserves, compared to the current threshold of 20x.

David Oxley, a senior Europe economist at Capital Economics, said the increase in the threshold could be a sign that the central bank may cut rates at some point, according to the newswire.