Switzerland made its main interest rate negative on Thursday, a rare occurrence designed to discourage investment by foreign money that has poured into the country in part to escape the plunging Russian ruble.
The Swiss central bank will start charging large depositors 0.25 per cent on what are known as "sight deposit account balances" of more than 10 million Swiss francs — the equivalent of just over $11 million Canadian.
The move forces commercial banks to pay to deposit their francs with the Swiss National Bank — usually they get a small interest rate for doing so.
The move is aimed at preventing the Swiss franc from appreciating too much. That can hurt the country's exports and weigh on the economy over the long run.
Switzerland is doing too well
The value of the franc has soared, both because of the underlying strength of Switzerland's famously insular economy, and because it's perceived as a safe haven — an investment that's less likely to lose money. It's especially attractive to Russian investors looking for a safe place to park their money in a world of a cratering ruble.
"Rapidly mounting uncertainty on the financial markets has substantially increased demand for safe investments," SNB President Thomas Jordan told a news conference in Zurich. "The worsening of the crisis in Russia was a major contributory factor in this development."
The move appears to be working, at least in the short term. The euro is 0.3 per cent firmer against the Swiss currency, at 1.2043 francs, in the wake of the bank's announcement.
The ruble is down by almost 50 per cent this year as tough sanctions imposed on the country because of Putin's incursions into Crimea have started to take effect, at the same time plunging oil price take billions out Russia's economy.
Russia relies on energy for more than a third of its GDP. The exodus away from oil has sparked a similar flight from the ruble.