Actionable news
0
All posts from Actionable news
Actionable news in TLT: ISHARES 20+ YEAR TREASURY BOND ETF,

Cash in a Box Catches On as Swiss Negative Rates Bite

  • Demand surging for insurance to protect cash stores from theft
  • Businesses resorting to vaults as banks pass on negative rates

It’s a sign the world is getting used to negative interest rates when what once seemed bizarre starts looking like the norm.

Consider Switzerland, where more and more companies are taking out insurance policies to protect their cash hoards from theft or damage.

“Because of the low interest rate level, we note increasing demand for insurance solutions for the storage of cash,” said Philipp Surholt at Zurich Insurance Group AG, among underwriters reporting a surge in such requests. “We’re seeing demand for coverage for sums ranging from 100 million to 500 million francs.”

The Swiss National Bank imposed sub-zero rates in early 2015, effectively charging banks for excess deposits. Many lenders including UBS Group AG and Credit Suisse Group AG have passed on at least some of the burden -- they don’t disclose how much -- to cash-rich clients like asset managers and big companies.

While the central bank is seeking to rein in the franc, negative interest rates have side effects that over time could outweigh the benefits. That risk may be on the minds of SNB officials when they meet next week for their scheduled quarterly monetary policy review. Economists expect they will keep the rate steady at minus 0.75 percent, the lowest among major central banks.

“The SNB’s dilemma is that it can’t make everyone happy,” said Alexander Koch, an economist at Raiffeisen Schweiz. “In its attempt to get the best deal for the Swiss economy, it also has created losers and collateral damage.”

Helvetia Holding AG said it charges about 1,000 francs ($1,020) a year to insure 1 million francs, a fraction of the 7,500 francs a company would pay to park the same amount in a bank for a year -- assuming the lender passes on the full charge. But that amount doesn’t include...


More