ZURICH (Reuters) - Switzerland’s biggest bank UBS could pass on negative interest rates to wealthy private customers or add new service fees to ensure profitability and capital returns in the current environment, its chief executive said on Tuesday.
UBS already passes on negative interest rates to corporate clients, but CEO Sergio Ermotti’s admission is a sign of the pressure Swiss banks are under due to the Swiss National Bank’s negative interest rate policy.
“If the conditions remain as they are or grow worse, we will have to consider extending these measures to very wealthy clients and increasing interest rates on loans,” Ermotti said at the group’s annual general meeting on Tuesday.
“Or we will have to demand payment for services that were previously free – with the possibility that additional fee adjustments in the future will also be necessary.”
Low or negative interest rates meant banks had to weigh taking on client assets against the costs these incurred for the institution and the “unreasonably large amount” of capital with which they needed to back up liquid assets.
Interest rates in UBS’s native Switzerland have been held at fresh record lows for more than a year. Since lifting a minimum exchange rate cap against the euro in January 2015, the SNB has charged 0.75 percent for deposits held with the central bank.
UBS last week reported weaker first-quarter earnings and capital, triggering the biggest drop in the Swiss bank’s shares in more than a year, despite efforts to reassure investors with details of cost and job cuts.
Reporting by Brenna Hughes Neghaiwi; editing by Susan Thomas