May 19, 2016 / 11:30 AM / 4 years ago

Swiss savers could hoard 1,000-franc notes to combat negative rates -gov't

ZURICH, May 19 (Reuters) - Swiss savers could hoard 1,000-Swiss franc bills — one of the world’s most valuable banknotes, now worth around $1,014 — to avoid the Swiss National Bank’s (SNB) negative interest rate policy, Switzerland’s government said.

In order to weaken the franc, the SNB has pushed interest rates to record low levels since January 2015. It now charges banks 0.75 percent on some deposits and aims to keep three-month LIBOR around -0.75 percent.

“In Switzerland’s case, investors could be inclined to keep their liquid assets increasingly in banknotes in order to circumvent negative interest rates on bank deposits,” the government said in a written response on Wednesday to questions in parliament about the continued use of the 1,000 franc note.

With the exception of Alternative Bank Switzerland, Swiss banks have not yet passed on negative rates to retail customers but many have introduced deposit charges for cash-heavy corporate, private and institutional clients.

Currency denomination is decided by the SNB, which has previously said it has no plans to take the 1,000 franc bill out of circulation.

The decision raised some eyebrows, particularly after the European Central Bank’s decision this month to stop issuing 500 euro ($561) banknotes towards the end of 2018 on concerns the notes could facilitate illicit activities.

Asked about such concerns, the Swiss government said there was no indication that large banknotes were used for criminal purposes in Switzerland.

$1 = 0.8915 euros Editing by Gareth Jones

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