Switzerland has saved 10 billion!

Money is also under the bed in Switzerland – or at least it was there until recently. And now the savers bring the money back into the bank account. This is illustrated by the latest figures from the Swiss National Bank. From June to October, banknotes in circulation fell by about CHF 10 billion. That’s ten percent of all the money found in Swiss wallets, cash registers, piggy banks and trouser pockets, or stowed in safes and under famous mattresses to store value.

Particularly striking is the disappearance of mainly large denominations, that is, two hundred thousand notes, while small notes remain in circulation. The thousands, in particular, were popular as a store of value and are now traded.

Skipping negative interest rates

In June, the SNB raised interest rates for the first time in more than seven years, heralding the end of negative interest rates and also an escape from cash, as can be seen from the SNB chart.

Since the introduction of negative interest rates, there has been repeated speculation about how bank customers have defended themselves against negative interest rates. Financial institutions would prefer to invest their money in stocks or other securities. Now it turns out that at least not everyone follows this advice.

Even SNB Chairman Thomas Jordan (59) has to admit this: “There were certainly a few individuals or companies that tried to cheat or circumvent negative interest rates with thousands of bonds. But overall it was limited.” Basically, this holds true: “The demand for cash always goes up when interest rates are low. On the other hand, when interest rates are high, it’s more tempting to put the money into a savings or salary account, then you get something in return,” adds Jordan.

Banks raise interest rates

This is true. The first banks reacted immediately to the SNB’s interest rate decision. For example, Zürcher Kantonalbank (ZKB) had already increased interest rates for savings and retirement accounts at the beginning of 2023. Valiant and Bank Cler will also pay their customers higher interest on their savings from January 1. Zuger Kantonalbank is also increasing, but customers have to wait until the beginning of February.

It is quite possible that the cash return will continue for a while and the larger banknotes will remain in the SNB. Because banks keep as much cash as they really need for filling ATMs or transactions at the bank counter. The rest will be returned to the Central Bank. And that’s where the 200 and 1000 bills should end up in the safe. Unlike small notes, big notes have a very long lifespan. Therefore, these are not usually destroyed, but stored for the next cash increase.

Note circulation doubled

Such exacerbations are not uncommon. It’s not just negative interest rates that drive demand. In general, the following applies in times of uncertainty: Only cash is correct. Because during the 2008 financial crisis, the need for cash in large banknotes increased as much as during the euro debt crisis or the corona epidemic.

And at the cash end: from mid-2008 to mid-2022, the value of all banknotes in circulation more than doubled, from 41 billion francs to 92 billion francs.