SNB decides further adjustment to interest rate on sight deposits
Published: Monday, Dec 16th 2024, 13:00
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The Swiss National Bank (SNB) is making adjustments to the interest rate on sight deposits. However, this does not change the monetary policy orientation, the SNB emphasized in a statement on Monday.
Specifically, the SNB is reducing the factor for the limit that is applied to the interest rate for current account holders subject to minimum reserve requirements. According to the SNB, this factor will be further reduced to 20 from 22 at the beginning of February 2025. The central bank had already reduced the factor to 22 from 25 at the beginning of October.
With the reductions, the SNB wants to counteract the increase in the limits applicable to interest rates, as was also reported. This is because the increase in the minimum reserve requirements implemented on July 1, 2024 also increased these limits.
The SNB policy rate is applied to sight deposits held at the SNB by financial institutions subject to minimum reserve requirements up to a certain limit. Sight deposits that exceed the limit earn interest at the SNB prime rate minus a discount. No interest is paid on sight deposits held to fulfill the minimum reserves.
According to the SNB, the basis for calculating the limits remains unchanged. These will continue to be calculated using the current average of the minimum reserve requirements of the banks subject to minimum reserve requirements over the last three years, multiplied by the currently applicable factor.
No change in monetary policy orientation
The reduction in the factor ensures that monetary policy continues to be implemented effectively and supports an active money market, the SNB stated. The current monetary policy orientation would not change as a result of the factor adjustment. The SNB regularly reviews the interest rate on sight deposits and makes adjustments where necessary.
Total sight deposits at the SNB comprise the largest item, the sight deposit accounts of domestic banks. These sight deposits form the basis for the SNB's management of liquidity on the Swiss franc money market. The SNB thus influences the interest rate level on the money market through the interest paid on sight deposits.
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