Banks Saving less worthwhile after another interest rate cut

Bad news for savers: after the SNB's latest interest rate cut, many banks are once again paying less interest to savers.

For years, savers have hardly received any interest on their money. With the interest rate turnaround initiated by the SNB in 2022, this has recently changed again. Last year, banks significantly raised their interest rates on savings and pension accounts again.

However, the upward trend came to an abrupt end with the SNB's first interest rate cut in March of this year. Even then, some banks reacted by cutting interest rates. With the second SNB rate cut to 1.25 percent on Thursday (yesterday), a number of other banks will follow suit, according to a survey of Swiss banks conducted by the news agency AWP.

Interest rate cut already decided in some cases

Some banks have already reacted immediately to the SNB's latest interest rate cut and announced a reduction in interest rates on savings deposits - very few banks pay interest on private accounts anyway. Among the major banks, Raiffeisen is the most notable. However, the Raiffeisen Group is only making a recommendation to the individual cooperatives, which are then free to decide on the specific terms.

After the first interest rate cut in March, Raiffeisen initially kept its interest rate recommendation stable. With effect from August 1, the recommended interest rate for savings deposits will therefore fall comparatively significantly. The Group now only recommends an interest rate of 0.70 percent for member savings accounts, down from 1.10 percent previously. For deposits over CHF 100,000, the interest rate has fallen from 0.70 percent to 0.45 percent. The reduction on other types of savings accounts is also up to 0.5 percentage points.

Valiant Bank had initially waited and is now passing on the interest rate cuts to customers on July 1 on payment, savings and pension accounts, as it said on request. The Thurgauer Kantonalbank is also lowering interest rates on savings accounts. As of July 1, the interest rates on the bank's savings account will fall by 0.15 to 0.25 percentage points. For the Premium savings account, the interest rate will fall for the second time this year. So far this year, the drop amounts to 0.35 percentage points.

Many banks are still monitoring the situation

Many larger banks in Switzerland are holding back on immediate interest rate adjustments for the time being. "Following the second SNB interest rate cut on June 20, we are continuing to monitor the development of capital and money market rates, as well as the rest of the market environment," writes Migros Bank, for example. Postfinance, Berner Kantonalbank (BEKB), Zuger Kantonalbank (ZGKB) and Hypothekarbank Lenzburg responded in a similar vein.

Luzerner Kantonalbank (LUKB) has not yet made an interest rate decision following an initial rate cut in May. Due to the expected lower interest income, it will "further reduce interest rates on customer credit balances", according to LUKB.

UBS also adjusted its interest rates at the beginning of May. The bank did not wish to comment on possible further interest rate cuts at this time.

Some cantonal banks refrained from lowering interest rates after the SNB's first interest rate decision in March. Examples include Zürcher Kantonalbank (ZKB), Berner Kantonalbank (BKB), St. Galler Kantonalbank (SGKB) and the BKB subsidiary Bank Cler. Following the SNB's renewed interest rate hike, none of the banks ruled out the possibility of a rate cut at a later date.

Digital banks still pay comparatively high interest rates

The so-called digital and neo-banks continue to pay comparatively high interest rates. However, interest rates are also under pressure here. For example, customers at Willbe, a subsidiary of Liechtensteinische Landesbank LLB, are now receiving 0.2 percent less on short-term deposits.

At the Bank Cler subsidiary Zak, no decision has yet been made on future interest rates. The only thing that is certain is that the newly launched savings account will continue to pay a comparatively high interest rate of 1.3 percent, the bank announced.

Neo-Bank Yuh, which is half-owned by Swissquote and half by Postfinance, has deliberately not passed on the first cut in key interest rates to customers, even though this has reduced its margin, it announced. However, the effects of the new key interest rate cut are still being examined.

SDA