Analysts: "The effectiveness of the negative interest rates depends on the level of the penalty"

The introduction of negative interest rates on deposits denominated in Swiss Francs needs to be severe enough to reduce the inflow of capital into Switzerland, Romanian analysts consider.

The economists estimate that other measures to limit the inflows of capital are possible, considering that the turmoil in the Eurozone isn't showing any signs of abating.

As for possible domestic effects of the Swiss announcement, analysts consider that they would be minor.

• Aurelian Dochia: "I don't think that the effects of the announcement made by the Swiss bank will be felt here"

The measure announced by the Swiss banks comes as a complement to the decision of the Central Swiss Bank, which has decided to cap the appreciation of the Swiss Frank by setting the exchange rate for the Eur/Chf pair at 1.20 units, due to the fact that Switzerland was beginning to face serious problems caused by the capital inflows, economic analyst Aurelian Dochia said.

He said: "That should relieve the pressure on the Swiss Franc. The strengthening of the Swiss Franc is artificial, because the Swiss currency is considered a safe haven, and its evolution depends on the policy of the Swiss Central Bank, and not on what is happening in the economy. Investors must be discouraged from keeping their money in Swiss Francs, because increasing risks are accumulating. Investors may gradually turn towards other assets".

Aurelian Dochia doesn't think that the effects of the announcement made by the Swiss banks will be felt in Romania. The economic analyst added that the interest charged on loans denominated in Swiss Francs in Romania are low, and the pressure on the interest rate will continue, but the Romanian banks won't consider cutting the interest rates on the loans denominated in the Swiss currency anytime soon.

• Daniel Dăianu: "The discouragement of the inflows of capitals will depend on the severity of the negative interest rate"

The decision of the two Swiss banks isn't a novelty, because Switzerland has already resorted to negative interest rates before, when investors moved their money there, said Daniel Dăianu.

The negative interest rate is a form of taxation of the Swiss currency, but discouraging the capital inflows will depend on how far it is taken, he added.

The economic analyst said: "The interest rate cut needs to be severe enough to reduce the inflows of capital into Switzerland. The decision comes in support of the Central Bank of Switzerland, which doesn't know what to do anymore to keep the Franc from strengthening against the Euro. Thus it imposes rules on commercial banks to reduce the net liquidity inflows".

In his opinion, if inflows into Switzerland are discouraged, investors could turn towards Great Britain, as the Sterling pound is considered a safe haven.

• Călin Rechea: "Considering the storm in the Eurozone, the effects of such a measure are limited"

The practicing of negative interest rates on deposits may not be enough to stop the capital inflows into Switzerland and other measures may follow, economic analyst Călin Rechea said.

"Considering the storm Considering the storm in the Eurozone, the effects of such a measure are limited", the economic analyst said.

Following the announcement made by Credit Suisse and UBS, the Swiss Franc may depreciate in the long term, but only if the storm in the European Union subsides, he went on to say.

Călin Rechea considers that it is unlikely that the Swiss franc would depreciate, given that there has been a strong appreciation trend lately.

He said that he doesn't expect any direct effects on the domestic market, following this decision.

• Florin Cîţu: "Banks are trying to protect their profits by introducing negative interest rates"

By introducing negative interest rates on the deposits in Swiss Francs, banks are trying to protect their profits, said economist Florin Cîţu.

He expects the Swiss Franc to remain at 1.2 units against the Euro.

As for possible effects on a domestic level, they are less likely, according to Florin Cîţu, who said: "There may be an impact on the exchange rate, fluctuations of the leu towards the Euro and then towards the Franc".

• "Admiral Markets" analysts: "The Swiss may resort to unlimited printing of Francs"

The interest in Swiss Francs will not disappear with the introduction of the negative interest rates, as a limited loss is preferable to the unlimited devaluation which the European currency is subjected to, the currency market analysts of "Admiral Markets" consider.

Investors will go for the lowest risk as long as the deficit crisis in the region will not be overcome, and eventually, the Swiss will go for the American method, recently taken over by the Japanese, the so-called unlimited printing of currency, according to the analyst.

Yesterday, the Romanian National Bank announced an exchange rate of 3.7405 lei for a Swiss Franc, down from 3.7467 units.

Since the beginning of the year, the Swiss Franc has gained 5.36% against the Franc.

The official leu/euro exchange rate yesterday rose to 4.5316 units, up 0.28% over the previous level.

The leu/dollar a exchange rate fell yesterday from 3.4666 units to 3.4665 units.