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Comment by phlo | Hacker News Reader

In Switzerland, the current target interest rate (set by the Swiss National Bank) is -1.25 to -0.25 percent, with current rates around -0.75%.

This means banks need to pay the SNB on their funds deposited there. Many of them pass that on to their customers: Deposits don't earn any interest to speak of, and for large sums (starting from 1M or so), banks commonly charge interest. At some points, the yield on Swiss Gov't bonds was even negative.

If you can offer a safe (and bank-accepted) way to store that money, you stand to make a killing.

On the other hand, even in that environment, mortgages aren't free. Rates range from 0.5 to more than 2%. Part of that is the banks' margin, part of it comes from fixing the interest rate for some (2-10) years.

[1] https://www.snb.ch/en/iabout/stat/statpub/zidea/id/current_i...

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I'm surprised the rate would get that negative. Especially when they have a 1000 Franc note (worth around 1000 dollars). At that level you can fit trillions of dollars in a single vault. A respected bank could build a new vault, staff it with multiple guards, charge 0.2% or 0.1% for storage, and make their investment back in under a year. Even with smaller notes. Obviously I'm missing something here, but what? Is it not safe enough?

A that sort of scale, you need government permission to turn the banknotes back into legally recognized bank account balances. So if there's a 1% chance Switzerland says "no, you can't actually just store cash in a vault instead", you're losing money on a risk-adjusted basis.

Needless to say, when rates did go negative, banks did not respect the interest rates they agreed to. Did not respect the contracts they agreed to with customers.

When they were legally forced to do so, the government prevented them from being sued to do it anyway, by destaffing the only judicial office where such procedures could be started.

Also, banko Santander was sold to external investors, with direct involvement from the central bank and the Spanish government, and ... failed to mention these negative-interest-rate obligations. If anyone else ever did anything remotely approaching this they wouldn't just be nailed to the cross, people would be talking about it for decades too.

Oh and despite all this cheating, banks and governments not respecting their own laws (nor even taking the time to change them, or even so little as involve the legislative branch in the process), despite violating every precept of democracy on both the Spanish and European level ... all large Spanish banks are a hair away from bankruptcy.

https://www.nytimes.com/2016/12/21/business/spain-banks-mort...

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