UBS to introduce charges for accounts over €1 mln

UBS, the world’s biggest wealth manager, will impose a penalty charge on customers who park euros with the bank, a reaction to the negative interest rate environment in the euro zone.

The Swiss bank, the world’s largest wealth manager, will introduce from May an annual fee of 0.6% on accounts with more than €1 million ($1.1 mln). The charge will apply to total amounts held by individual customers and be calculated on a daily basis. It comes in response to the ultra-low or negative European Central Bank rates, in the wake of the financial crisis, which have eaten into banks’ margins. UBS currently imposes an individual deposit charge for large account balances held in Swiss francs by corporate, institutional and certain very wealthy clients, as it deals with negative interest rates charged by the Swiss National Bank. 

The European Central Bank first took its deposit rate below zero per cent in mid-2014. Now, the rate stands at -0.4 per cent, still somewhat above the Swiss central bank’s sight deposit rate of -0.75 per cent.

“UBS will apply an individual deposit charge on large euro cash balances for European clients,” a UBS spokesman said. “This charge reflects the increasing costs seen across the industry of re-investing cash from deposits in money and capital markets, the continued extraordinarily low and negative interest rates in the euro area and increased liquidity regulations.”

Commerzbank has even considered storing cash in vaults to avoid paying ECB fees. The policy of penalising banks has come under criticism in Germany because it discourages saving.