The Swiss bank has now decided to lower its threshold for fees from its wealthy clients from 500,000 euros onwards.
Euro banks under pressure
UBS Group AG is facing tough times due to lower profits and negative interest rates. The problems have led the bank to focus on its wealthy clients and lower the threshold for charging a fee. The bank recently announced that all wealthy clients with individual accounts holding over 500,000 euros ($560,000) in cash will now be liable to pay them a fee of 0.6% per year. The program will start in November.
UBS is the largest wealth manager in the world, but its new fee will only be applicable to its Swiss units. The fee is much higher than the deposit rate of -0.4% prescribed by the European Central Bank. More specifically, it is 20 basis points higher than the rate set by the ECB and designed to bring more of the bank’s clients under its fee structure.
Why are banks taking such measures?
Low or negative interest rates have been commonplace in Europe for long, and banks are now crunching under pressure. Recently, HSBC decided to fire its CEO and look for a new person to help the bank speed up its growth. The bank, which has a strong presence in China and the broader Asian region, is facing local media’s ire for siding with the US during the arrest of Huawei’s CFO. The bank’s US business is also ailing.
Amidst testing times, banks now want their wealthier clients to absorb the negative rates of interest and help them stay afloat. Meanwhile, central banks across Europe are busy helping boost growth. UBS’ steps are extreme compared with its rival Credit Suisse. The bank recently announced that it would charge a 0.4% fee from euro account holders who have over 1 million euros in a deposit. The plan will be effective from September.
Both the banks are planning to introduce negative rates for individual account holders who have large balances in Swiss francs. Note that banks already let their institutional clients absorb negative interest rates but have historically stayed away from letting their individual wealthy clients do the same. Such clients may withdraw their money, leading to loss of business. Julius Baer Group met a similar fate last month as customers withdrew their money after negative interest rates apply to its larger accounts.