Swiss low rates could last decades, financial regulator tells newspaper
ZURICH – Switzerland’s low interest rate environment could last years or possibly decades, the country’s financial regulatory chief told a Swiss newspaper on Sunday.
“It’s possible that low interest rates could last not only years, but decades,” Mark Branson, the head of Swiss financial regulator FINMA told the newspaper Schweiz am Sonntag. “Banks and insurers need to be able to survive in such a situation.”
In December 2014, the Swiss National Bank introduced a negative deposit rate for the first time since the 1970s, charging 0.25 percent on sight deposits.
On Jan. 15 this year, it ended its cap on the value of the franc against the euro and cut the deposit rate further, to 0.75 percent, where it remains. The move took markets by surprise and left the country facing economic uncertainty.
The low rates put the basic assumptions of banks and insurance companies in doubt and are the question most worrying Branson, he said.
“Such an environment is historically unique,” he said. “The longer the phase lasts, the harder the exit will be once interest rates become attractive again.”
When questioned about low interest rates remaining for decades, he said, “I said: could. It’s not impossible. Let’s look at Japan. In the 1990s, no one could have said that the country would still have such low interest rates today.”
Switzerland’s finance industry is generally well-equipped to absorb shocks, he said, citing the results of stress tests that the regulatory body performed with banks and insurance companies. “But it’s also clear, that the current economic environment is presenting a great challenge.” -Reuters