On Monday, the Swiss National Bank (SNB) announced it would lower the amount of interest paid to commercial banks for funds deposited overnight.

The decision follows on from costs skyrocketing with the conclusion of the negative rate regime and efforts to curb the rise of the Swiss Franc.

Switzerland’s central bank paid 3.3 billion Swiss Francs ($3.66 billion) in interest on sight deposits during the first half of this year, after it brought an end to close to eight years of negative rates. During this time, commercial banks had to pay the central bank to hold cash overnight, Reuters reports.

As of 1st December, sight deposits held to meet minimum reserve requirements will no longer be paid. In addition, from this date, banks will be paid the central bank’s policy rate – which currently stands at 1.75% - on deposits equivalent to their minimum reserve requirements.

Furthermore, sight deposits held over a bank’s individual threshold will be paid the central bank’s policy rate, less a 0.5 percentage point discount, the Swiss National Bank went on to add.

“The changes have no impact on the current monetary policy stance. These adjustments will ensure that monetary policy implementation remains effective and will reduce interest costs for the SNB,” the central bank continued.

There was no comment from the SNB as to the amount of savings it forecasts to make.

During 2022, the central bank lost 1 billion Francs on its Swiss positions, as the move to positive interest rates in September last year led the bank to pay more than the income gained from negative overnight rates previously in the year.

In addition, the SNB made a full-year loss in 2022 of 132.5 billion Francs, predominantly as a result of losses on foreign currency investments.