Lose customers, collect cantons: Cantonal banks only pay low interest on savings

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The cantons’ coffers are ringing: they closed CHF 4.6 billion better than budgeted in 2022. This year will be even better, as cantonal banks also reported record results in the spring.

For the first time, Zürcher Kantonalbank made a profit of over one billion Swiss francs. 320 million of this goes to the canton of Zurich, which owns it. Aargauer Kantonalbank also made a record profit: CHF 179 million. The canton receives 92 million. Graubündner Kantonalbank raised $207 million. The canton collects 93 million.

The reason for the registrations is interest. Financial institutions owe more than half of their income to him. “The interest business is booming,” says economist Adriel Jost, 38, who is visiting researcher at the Swiss Institute for Economic Policy at the University of Lucerne.

Valais and Zug give even less

The mechanism is simple: Banks deposit large sums of money in the Swiss National Bank (SNB) – currently around CHF 500 billion. For this, financial institutions receive interest from the SNB. This is currently 1.75 percent.

On the other hand, the interest rate that banks pay their customers is significantly lower. Private accounts usually have none. And the savings rate is well below one percent. Zürcher Kantonalbank grants 0.75 percent up to 50,000 francs and 0.25 percent up to 250,000 francs. There is no interest for higher balances. Up to 100,000 francs in Basler KB 0.6 percent and 0.4 percent above that.

A savings account at the Cantonal Bank of Wallis gives even less: 0.55 percent interest up to 50,000 francs and 0.3 percent interest up to 250,000 francs. Zuger KB grants only 0.4 percent up to 100,000 francs. There is nothing about it. And the Geneva Cantonal Bank offers 0.5 percent up to 30,000 francs and 0.1 percent for anything over that amount.

“We are convinced that interest on savings accounts is too low in the current interest rate environment, so we have asked banks to improve interest rates and conditions,” says André Bähler, Head of Consumer Protection Policy and Economics (44).

Sometimes interest rates rise

In fact, individual cantonal banks will raise interest rates from August. Aargauer Kantonalbank now owns 0.75 percent instead of 0.6 percent. Zuger KB is also more generous: instead of 0.4 percent up to 100,000 francs, it gives 0.4 percent up to 200,000 francs.

It’s not revolutionary. Only Luzerner Kantonalbank is taking a real step forward: it now offers 1 percent interest up to 100,000 francs and 0.9 percent above that. The bank tells SonntagsBlick that this means it’s still in good shape economically.

In any case, given the next expected rise in key interest rates in September, it’s clear today that financial institutions won’t have to face deficits in the future either. Especially because they still benefit from the fees they raise during times of negative interest rates and another interest rate front that gives them more every day: the base rate raises their mortgage rates. And because banks are stable: Ten-year flat-rate mortgages are already three percent.

The result: Cantonal banks’ profit margins continue to rise. Today they reach values ​​of 50 percent and above. For comparison: SBB’s profit margin is ten times lower. But insurance companies or pharmaceutical companies can only dream of such values.

Zuger Kantonalbank reviews

47 percent of the Swiss population has an account in a cantonal bank. What is the purpose of these institutes? “They make a significant contribution to providing banking services to the local population and economy,” emphasizes their association. However, the interest rate policy of the cantonal banks shows that they are primarily focused on maximizing their profits.

For comparison: In 2008 the basic interest rate was one percent. The average savings rate was 0.94 percent. The key interest rate is higher today and the savings rate for the population struggling with inflation is lower than it was 15 years ago.

What do banks say about this situation? At SonntagsBlick’s request, most of these have escaped. Only Zuger Kantonalbank takes a clear position: “Our interest rate policy is market-based. We cannot understand the statement that a disproportionate profit is made at the expense of the customer. We transfer the interest advantages to our customers instantly and offer attractive conditions in our accounts according to the market.”

What about the cantons? They can intervene as major shareholders and demand, for example, that the cantonal banks lower their profit margins in favor of customers. Or they could limit bankers’ salaries. This measure will also result in more things being left to customers.

Zurich finance director is silent

“From a liberal perspective, more competition would be the best solution,” says economist Adriel Jost. “But customers need to stick to the deal and be more willing to switch banks.” Jost says the problem cannot be solved overnight anyway. “When the state gives too much support to an industry, it is always problematic. Cantonal banks are no exception. In the end, there are only ugly solutions.”

Ernst Stocker (68) also seems to suspect this. He is the Finance Director of the Canton of Zurich and the Head of the cantonal Finance Directors. But he doesn’t feel like talking about the interest rates of the cantonal banks. His spokesperson said that financial directors have not taken any decision on this issue. Therefore, Ernst Stocker does not comment on this.

Source :Blick