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Swiss companies store cash away from banks

Categories : Cash is efficient
September 12, 2016
Tags : Central Bank, Commercial bank, Europe, Liquidity
Negative interest rates are pushing Swiss companies to store their cash with insurances, away from banks.
Communication Team / Equipo de Comunicación

Early 2015, the Swiss National Bank introduced negative interest rates. As a result, some companies have been taking charge of their own cash to avoid bank fees by protecting their stored wealth from theft or damage through insurance policies. With current rates at minus 0.75%, storing CHF 1 million at the bank costs CHF 7,500 a year compared to over one-seventh of that (CHF 1,000) with an insurance plan.

Today, insuring cash offers a better bargain than storing it in the bank, but such schemes also require other considerations such as the logistics of transportation as well as security infrastructure for physically protecting these liquid assets. Nevertheless, considering the growing number of companies adopting self-storage of cash, there is presumably a significant economic benefit that comes with choosing this option.

Switzerland is one of the few countries to have maintained high denomination banknotes in circulation, making self-storage a feasible and more appealing alternative to bank deposits. In fact, to store his/her first million in CHF 1,000 notes, all a millionaire needs is a small box!

Fortunately, negative interest rates are currently only affecting large companies, and not consumers. However, SNB claims to be continuously analysing the pros and cons of this monetary policy, and appears to have decided that the long-term positive benefits will outweigh the negative impacts. 

If the policy does end up reaching consumers, self-storage of cash will surely become a popular back-up plan. 

For the Bloomberg News’ full article, please click here