SNB Chairman advises customers to switch banks for better interest rates
Published: Sunday, Nov 26th 2023, 10:21
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In the competition for more attractive interest rates, Swiss National Bank President Thomas Jordan has called on certain savers to switch banks. "If they switch to another bank that pays more interest, this will force their previous bank to respond."
In an interview with the "NZZ am Sonntag" newspaper, Jordan appealed to customers to take responsibility. Their behavior could contribute to functioning competition.
While many banks made large profits, interest rates for savers have only risen hesitantly recently. The key interest rate is 1.75 percent, but a normal savings rate is far below this.
Jordan also showed understanding for the banks, which would first have to normalize their margins after the phase with negative interest rates. "I would remind you that interest rates for savers were previously mostly zero despite the negative prime rate." Once the normalization of margins is complete, competition between banks should ensure that interest rates on customer deposits rise again. "This process has already begun."
Confederation and cantons must wait
With regard to the SNB's profit distributions to the public sector, it is quite possible, according to Jordan, that the Confederation and cantons will have to do without them for a longer period of time. "The Confederation and cantons will only receive money again when the equity capital reaches the level we are aiming for." In order for profit distributions to be possible again, the distribution reserve must rise from the current minus 39 billion to well above zero.
In the phase before 2022, the SNB generated very high profits for several years and was also able to significantly increase distributions, says Jordan. "However, there may well come a period in which distributions are not possible." Internationally, many central banks are in a similar situation, some even have negative equity.
Jordan reiterated that the SNB's credibility and reputation depended on its ability to maintain price stability. "In an international comparison, we are doing very well here, the franc is the most stable currency in the world." Price stability is the National Bank's main contribution to Switzerland's prosperity. "The distribution of profits is a by-product."
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