Over a third of Swiss banks have admitted to looking at establishing negative rates for their private clients as the draining effect of negative rates on banks’ profitability becomes increasingly clear.
This is according to the Banking Barometer 2017, published by global insurance advisory firm EY, which surveyed 120 banks across Switzerland.
The report found that 35% of banks taking part envisage bringing in negative rates as they no longer want to shoulder the costs of negative rates.
Of these, 16% said they will consider it if the SNB increases its commitment to negative rate policies and the remaining 19% said it would only apply for clients holding assets over a certain threshold.
Cantonal bank, meanwhile, have shown themselves most in favour of imposing negative rates on clients, with 60% saying they are considering it. In 2015 only 20% of cantonal banks said they are looking into it.
If Swiss banks were to introduce negative rates for clients, 40% of respondents predicted that there would be a bank run as clients would withdraw over 10% of assets.
Regional banks are particularly worried about this scenarion, with over 50% believing there would be a large withdrawal of client money.
Structural change on the horizon
The survey has also found that 87% of Swiss banks taking part see the onset of structural changes in the sector and upheavals in the value chain.
It is both wealth management and investment adviser activities that are the most vulnerable to change, most banks said.
In light of this, an overwhelming 92% of respondents are pessimistic about the prospect for returns as they expect them to keep falling.
A huge majority of 90% expect a drop in the net number of banking institutions in Switzerland between now and the end of 2017.
The number of respondents expecting consolidation climbs with every year the survey is taken, it reports.
Commenting on the findings, EY Switzerland’s managing partner assurance, financial services, Patrick Schwaller said: ‘Given the many and varied challenges – some of them fundamental – that the banking sector in Switzerland is facing, the largely positive assessment expressed by Swiss banks comes as a surprise.
‘So far, banks are showing themselves to be quite resilient, but there is evidence of a disturbing opposite trend: of the banks who responded to the study, one-third take an increasingly gloomy view of the way their business is going to develop, and some of them see serious losses ahead.’