Market Analysis

On Monday, the Swiss National Bank announced its decision to increase the minimum reserve requirement for domestic banks, effective from July 1st. 

This adjustment, outlined in the amended National Bank Ordinance, aims to maintain the effectiveness and efficiency of the SNB's monetary policy, as stated in their official release.

The revision entails a significant change: liabilities from cancellable customer deposits, excluding tied pension provisions, will now be fully accounted for in the calculation of the minimum reserve requirement. Previously, only 20% of such liabilities were considered. Additionally, the minimum reserve ratio is being raised from 2.5% to 4%.

The SNB clarified that sight deposits, essential for meeting these reserve requirements, do not earn interest, resulting in reduced interest costs for the bank. Importantly, these adjustments are not expected to impact the SNB's current monetary policy stance.

SNB Chairman Thomas Jordan had previously hinted at the possibility of increasing banks' minimum reserve requirements in a newspaper interview back in November.

Paraphrasing text from "Investing" all rights reserved by the original author.