Pension funds now forced to pay 0.2% on liquidity.
Funds furious only 2 weeks notice was given and criticise UBS acquisition of CS allowing them to push through changes due to limited competition.
On the heads of the UBS executives: “Wait, wait…if we are in a ‘power position’ now, why not using it?..”
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It’s a cash management issue.
It also poses a really interesting question: can funds in a bank account be considered cash? The 0.2% fee implies funds in the bank are not cash. A fee is needed to convert a value in a database to cash.
Pension fund holders who park liquid assets with UBS have been paying negative interest again since mid-July – that is, CHF2,000 on CHF1 million held in cash.
UBS confirmed this upon request but said the -0.2% fee is technically not negative interest, but rather a fee that arises because UBS must keep liquidity available for institutional clients at all times. UBS says these additional costs are passed on.
Also, the Swiss National Bank is charging -0.25% to banks since last June:
UBS did not become too powerful, it became too big to save. Also, too big that it’s probably paying -0.25% for liquidity.
Pensions funds should not be parking their money in a bank. At least not in a single bank in a single currency.
Except they do need a certain level of liquid funds to pay their pensioners.