UBS may charge fee on cash-clearing accounts

Swiss bank UBS said on Friday client banks might be charged a fee on accounts they use to clear transactions in francs if inflows continue as the central bank's policy of flooding the market with francs feeds through to margins. "Should we see a continuation of the net inflow of francs in cash clearing accounts of our banking customers, we might have to take corrective action, within the next few days, by means of a temporary excess balance fee," the bank said.
Amid record demand for the safe-haven franc in recent weeks, UBS said it was closely monitoring the development of franc cash balances maintained in the current accounts of its franc clearing customers. "We encourage you to keep your balances in your franc cash clearing account as low as possible," it said in the note sent to its client banks.
The UBS news helped the euro climb more than 2 percent against the franc to a one-month high. The dollar also jumped against the franc. "This is a way to make investors have to pay for the privilege of owning the currency," said Cheviot Asset Management fund manager David Miller in London.
The move came amid speculation Switzerland might consider imposing negative interest rates on Swiss franc deposits as it fights a surge in the franc to record highs against the dollar and euro earlier this month. Cash clearing accounts are used by banks to fund their trading activities in other currencies. Managing unusually large balances could push up UBS's administrative and regulatory costs.
The Swiss National Bank denied earlier on Friday that it had sent letters to Swiss banks asking them to impose charges on franc deposits in a new bid to weaken the currency. The SNB has slashed interest rates to zero and is flooding the market with francs by rapidly expanding banks' sight deposits, with the franc falling rapidly in response.
National Australia Bank currency strategist Gavin Friend said the SNB's policy was cutting Swiss bank's interest margins. "The implication to commercial banks in Switzerland has been if you want to provide liquidity to foreign banks in francs, you need to charge them for it as you're getting nothing from us," he said. The SNB has threatened more action to counter what it says is a "massively overvalued" franc, prompting speculation it might be prepared to resume currency interventions or impose negative interest rates as it did in the 1970s.