Before you jump in with outrage or bafflement, consider that this isn't all that shocking, nor is having to pay a bank to keep your money totally unprecedented. Consider: if you want someone else to store your car, or your junk, or your data, you have to pay them. The only reason banks normally pay you instead is that your deposits are so useful (for making loans, and profit on those loans), that it's worth it to pay you to convince you to put your money there. But if economic conditions are such that the bank can't make any profit using your money, there's no reason why they would pay you to keep it there.

You might ask, why on earth would I pay a negative interest rate on deposits if I can just keep my money under my mattress? And yes, you could do that, and some people will (or they'll move to a different bank). But then you can't pay with debit cards or use any of the other services provided by a bank, or benefit from its physical security. Those things do cost the bank money which has to be paid somehow, it was just hidden from you by the interest rate.

The only thing surprising about this is that they are implementing it in the form of an explicit negative interest rate instead of hiding it from the customers in a per month account fee charge or something like that. Rates have been effectively negative for a while now it's just that in the US the banks have implemented it by piling on fees instead of explicitly charging a negative rate.

Totally off topic, but this completely threw me while trying to read the article:

> on client deposits higher than 100,000 Swiss francs ($98,650, 92,420 euros).

The usage of a comma as both the thousands separator, and to separate two currencies - one using a prefix and the other a suffix - had me instantly googling the exchange rate rather than reading the rest of the article.

I understand the principal of 'negative interest rates'; ie. if your interest rate is -ve, it incentivizes banks to move money into the economy rather than just holding on to it.

However, I keep reading this in articles: "Although retail banks have yet to pass on that negative to rate to Swedish consumers".

What does that actually mean?

Why are the banks affected at all by what the government determines the interest rate to be? What is this charge they would be 'passing the charge on to consumers'?

It's not like the total amount of money in the bank mysteriously grows or shrinks based on the government stipulated interest rate every year, and I've certainly seen many places where banks refused to pass on interest rate changes to consumers in general.

Is this just the rate applied to treasury bonds? Or some kind of tax related thing?

"A tiny Swiss bank .... The bank describes itself as an ethical organisation focused on backing firms investing in social and environmental projects."

This is the crux of the matter. Thier depositors are paying a mich higher fee by choice, in exchange for feeling good about their banking. I pay more for ethical food, clothes even childrens' toys to essentially make myself feel good/better about my spending.

This bank can get away with it. Other can't (at least for individual rather than institutional depositors).

That seems like just asking your depositors to put their money somewhere else...

That's not so surprising, the base rate is negative since more than a year. Because of fear in EUR, many people instead of buying Gold, people bought CHF. One of my friends said: its a beautiful country and has a lot of assets, so there is not much of a difference. The SNB [1] fixed the EUR/CHF to 1.20 for quite long time until it was dropped suddenly at 15.1.2015. From one day to another all goods in the EU cost ~20% less for the Swiss people. As I live near the Austrian/Swiss boarder, there were many Swiss people coming over to Austria that time, buying as much stuff they could get and importing to Swiss. Main problem for the Swiss economy is that suddenly goods from Swiss companies are ~20% more expensive than competitors outside of Swiss. Or employees in Swiss are suddenly 20% more expensive if your main currency is EUR or USD. That's bad for the economy.

On the 15.1.2015 they also changed the policy from fixed EUR/CHF exchange rate to negative interest rates to reduce the influx of money. Currently the rate at which the SNB borrows to the banks is -0.81% [2]. A friend of mine pays a premium of 0.75% on the base rate for his loan on the house, so the currently borrows from the bank at -0.06%.

So what else could you do with your CHF? Buy Swiss Confederation bonds, the current yield is also negative, -0.28% [2]. Or buy EUR, more risky but more interest? Put under your pillow, too risky? Exchange to gold, pay for insurance or to keep it safe? Bonds of a country nearby? Only 0.46% for 10 years in Germany [3] and in EUR.

[1] http://www.snb.ch/en/iabout/stat/statpub/zidea/id/current_in... [2] http://www.snb.ch/en/iabout/stat/statpub/zidea/id/current_in... [3] http://www.deutsche-finanzagentur.de/de/factsheet/sheet-deta...

This happened 4 years ago for institutional clients, see: http://www.wsj.com/articles/SB100014240531119033665045764881...

Gold doesn't pay interest. But it doesn't have a negative interest rate either.

For those interested in reading some academic literature related to the subject, read Fischer Black's Interest Rates as Options.