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Swiss trade unions call on central bank to refund negative interest

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The Swiss trade union federation has called for the country’s central bank to “return” to pension funds the money it has made from its negative interest rates.

ASIP, the country’s pension fund association, has said it supports the call in principle, while the Swiss National Bank (SNB) has pointed out that it does not impose negative interest rates on pension funds and cannot therefore make any refunds to them.

The trade union organisation – SGB in its German acronym, USS in its French – made the appeal in the context of its annual press conference earlier this year.

It said the Swiss National Bank (SNB) should pay some CHF1.2bn (€1.1bn) – the money it says it has collected from negative interest rates – to the country’s pension funds.

It suggested this be done via the insolvency protection fund for the second pillar, the Sicherheitsfonds.

This would somewhat alleviate the pressure on pension funds, according to the trade union organisation.

It also called for the first-pillar social security fund (Compenswiss) to be fully exempt from negative interest rates.

In a statement, an SNB spokeswoman told IPE this was already the case, although the SGB’s chief economist then noted it was only exempt up to a certain threshold. 

In February 2015, the SNB introduced a negative rate of 0.75% on deposit account balances held with the central bank.

The country’s pension fund association, ASIP, has on several occasions called for an exemption from the negative interest rates for pension funds, but these calls have gone unheeded.

Pension funds do not hold accounts at the central bank, but, in addition to being under pressure from the low-yield environment, they are affected by the negative interest rates to the extent that banks pass on the costs to them. 

The trade union federation’s suggestion is a new twist on calls for relief for pension funds from the central bank’s negative interest rates.

ASIP has said the trade union’s proposal for a reimbursement is generally welcome.

However, it said there were open questions about the amount of “any additional financing source” and that the proposal also ultimately failed to address the main problem pension funds have to contend with – namely, the low-interest-rate environment in general, rather than negative interest “on liquidity”.

The association also said it would need to be seen how such a payment transfer could be implemented, and whether doing so via the insolvency protection fund would be the most effective route.

It said every reimbursement was helpful but suggested this would need to be balanced against the implementation cost and the amount to be distributed.

SNB, in turn, told IPE that, because it does not impose negative interest rates on Pensionskassen – as they do not have accounts with the central bank – these cannot be returned.

It also said the earnings from negative interest, largely paid by banks, go towards the SNB’s general accounts and that a separate payout is not possible under the law.

In 2015, the SNB made CHF1.2bn from negative interest, and over the first three quarters of 2016 the amount was CHF1.1bn.

A portion of any profits made by the SNB is distributed to the Swiss government and the cantons.

The central bank has provisionally calculated that it will make a profit of more than CHF24bn for the 2016 financial year.

It foresees making a dividend payment of CHF15 per share to investors, while the Confederation and the cantons will get CHF1.5bn; this is the regular payment of CHF1bn plus a top-up.

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