ZKB could charge for Swiss franc deposits, but not yet
* ZKB raises prospect of negative interest rates
* Would only charge savers under special circumstances
* Says no plans to charge investors at moment
* Follows moves by Credit Suisse, UBS in Dec
ZURICH, Jan 10 (Reuters) - Zuercher Kantonal Bank says it could impose a charge on private Swiss franc savings accounts under certain market conditions, as the country's banks battle to protect profit margins amid rock-bottom interest rates.
Reports of the possible hit to savers' accounts caused the franc to weaken sharply, hitting its lowest since mid-December before recovering some ground. By 1530 GMT it was trading 0.2 percent lower at 1.2113 francs per euro.
ZKB said on Thursday it had no plans at the moment to introduce negative interest rates - effectively a charge on savers - and did not expect to do so for the foreseeable future.
However, it said it might under special market conditions, such as if the Swiss National Bank (SNB) were to introduce negative interest rates.
In an emailed statement, ZKB said account holders would be free to make unlimited withdrawals in the unlikely case that negative interest rates were introduced.
ZKB's comments come after larger rivals Credit Suisse and UBS said in December they would charge other banks for holding Swiss franc deposits.
The moves are an effort to cover costs that banks are unable to meet due to ultra low interest rates. Their actions are inadvertently assisting the country's central bank by helping to weaken the strong currency.
The SNB set a cap of 1.20 francs per euro in September 2011 to shield the economy after investors seeking a safe-haven from the euro zone crisis pushed the currency up by a quarter in just a few months.
Swiss officials have said they could consider imposing capital controls - such as negative rates on offshore deposits - to deter a new influx of hot money should the euro zone crisis worsen, but most economists see such steps as unlikely. (Reporting by Caroline Copley; Editing by Mark Potter)