12 Jan UBS warns rates will be “negative for years to come”
nbsp;ONE of Europe’s biggest banks is warning that interest rates will be negative “for years to come” as it set out plans to charge customers who are more than 250,000 Swiss francs in credit ((£210,000).
UBS said that while less than 5% of clients would be affected, it would have to charge a 0.75% interest rate charge from July.
Swiss banking head Axel Lehmann told employees in a memo seen by Reuters: “It’s becoming increasingly clear that we’ll have to contend with negative interest rates for years to come. That’s why we decided to lower the threshold for deposit fees.”
UBS says at the moment the move applies to the Swiss business, not customers in the UK.
That comes one day after a top Bank of England official said cutting rates below zero would be good for growth. Silvana Tenreyro, one of the nine members of the Bank’s monetary policy committee, said negative rates had worked in other countries and would assist the UK’s recovery from its Covid-19 slump.
A move to negative rates would prove controversial. Capital Economics said in a note: “There is an operational issue of whether financial institutions can actually deal with zero or negative rates.”
Banks might have to rejig computer systems to manage.
The latest lockdown seems to increase the chance that UK rates, presently 0.1%, will be pushed below zero.
Tenreyo said in a speech: “My overall assessment is that, while we can never have complete certainty, negative interest rates should with high likelihood boost UK growth and inflation.”
Professor Tenreyro, an external member of the MPC, made the comments in an online speech to the University of the West of England, in which she argued that negative rates were now a more effective tool than quantitative easing.
Yesterday, chancellor Rishi Sunak warned on the near term future for the economy. He said: “The economy is going to get worse before it gets better…the road ahead will be tough.”