"Credit Suisse" will impose negative interest rate on the interbank deposits

• The Franc is weakening, as investors are betting on similar measures from other Swiss banks

"Credit Suisse Group" AG, the second largest Swiss Bank, this week announced its institutional clients that it will apply negative interest rate on the deposits, starting with December 10th. Thus, banks keeping money with "Credit Suisse" will have to pay, and the decision comes as financial institutions are looking to cover the increasing demand for Swiss Francs.

In a notification sent by the Swiss Bank to the aforementioned clients, it said that the currencies concerned, the deposit limits and the interest rates will be announced within five working days.

"Credit Suisse" informed: "Due to the market conditions, and after carefully monitoring of the situation this year, we have decided to apply negative interest rates for deposits which exceed a certain amount. We are inviting our clients to keep their cash accounts as small as possible, to avoid the negative interest rates".

The biggest Swiss bank, UBS AG, is reviewing the impact of a negative interest rate, but it has not yet made a decision.

In other parts of the world, there have been other banks that decided to charge negative interest rates for deposits denominated in Swiss Francs and Danish Crowns: "State Street" Corp. and "Bank of New York Mellon" Corp. of the US. Also, "Royal Bank of Canada" is charging negative interest rates for deposits in Swiss Francs and Danish Crowns set up by specific clients.

Banks' clients have turned to the Danish and Swiss currencies because they are considered less risky than the Euro, whose fate is considered uncertain.

The Swiss Central Bank has tried to keep the exchange rate of the Franc under control. First, in August 2011, it cut the interest rates to near zero, and later, in September 2012, it has imposed a minimum threshold of 1.20 Francs/Euro to stop the strengthening of the currency, which was affecting exporters.

The officials of the SNB made no comment on the decision of "Credit Suisse" to impose negative interest rates on certain deposits.

The decision of "Credit Suisse", which was announced on Monday, has generated the depreciation of the Swiss currency, leading to a three-month low against the Euro. Yesterday, the depreciation continued, as the Swiss currency reached an 11-week low, as investors are betting that other Swiss banks will follow suit and will impose negative interest rates on deposits. While on the European market, the Swiss Franc fell to 1.2145 units/Euro, before noon yesterday, on the US market it was trading at 1.2137 units/Euro at 09:35, down 0.5% compared to the previous day. Thus, the Swiss Franc passed the 1.21 level for the first time since October 9th.