Despite the SNB’s positive key interest rate, commercial banks are slow to pass rates on to customers. There are many reasons for this.
In September 2022, the Swiss National Bank raised the key interest rate back into positive territory for the first time in a long time. Until now, however, commercial banks have been reluctant to pass on interest rates to their clients.
Sarah Stalder of the Consumer Advocacy Foundation was not surprised by the banks’ hesitant behaviour.
“If there is anything in favor of the provider, action is taken immediately. If there is something in favor of the consumer, a hundred excuses are sought to delay it as long as possible while still making a lot of money out of it,” says Stalder.
According to Stalder, banks also charged their customers extra fees during the negative interest rate phase. For them, the interest rate adjustment by the banks is overdue.
New banks feel the competition in interest rates on savings. Not surprisingly, Yuh, a new bank, was the first financial service provider to reintroduce interest on savings accounts.
Even before the September 2022 rate hike, Yeoh had set interest on his savings account at 0.5%. Yoh wants to use this to attract new customers.
Marcus Schwab, managing director at Yoh, says they want to respond quickly to customer needs. We don’t just want to be the ‘fast-tracker,'” Schwab says, “we want to be the ‘first mover.'”
Few incentives to raise interest rates
However, it is more complicated with traditional banks. These also work with long-term fixed-rate loans. “The bank has little incentive to quickly increase interest rates on savings,” says Andreas Dietrich, professor of banking and finance at the Lucerne University of Applied Sciences and Arts.
Because of the long-term interest rates in the mortgage sector, Dietrich says, banks try to pass savings interest on as late as possible. “Also, there is little pressure from customers.” Because there are few people who change banks due to low interest rates on savings.
Andreas Dietrich believes that the savings interest will soon be passed on to customers. “Maybe not exactly 100 percent, but I assume that many banks will now raise interest rates significantly in the next few months and get close to the key SNB rate.”
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