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According to the Neue Zürcher Zeitung (NZZ) the banking sector could lose several hundred million francs in the years to come due to the National Council’s decision to freeze interest rates on emergency loans linked to the Covid-19 pandemic.
At first, at the end of October the National Council changed and extended the repayment period for Covid-19 loans from 5 to 8 years. Moreover, it was decided by the National Council that for eight years the interest rate on emergency loans will remain at 0%.
Later on it was announced by the Federal Council that each year from 2021 the interest-free loans will be adjusted following market developments and the situation overall in order to prevent bank margins from shrinking or even becoming negative in the event of a rise in key interest rates.
As referred by the NZZ in “rough internal industry estimates” scenario, interest rate currently is -0.75%. It could entail additional costs of 375 million francs over five years for the institutions concerned, if this key interest rate were to increase by around 1 percentage (reaching +0.25%) in the years to come. Moreover, over a period of eight years, the change in the interest rate would cost the banking sector up to 600 million francs.
To cover the costs incurred for Covid loans banks receive interest from the Swiss National Bank (SNB). This applies when the current rate is -0.75%. For small establishments the increase of key rates could result with complications and problems.
It would be impossible also for the SNB to push the policy rate even lower into the negative rage.
Swiss companies have used a total of 135,418 Covid loans, 100% guaranteed by the Confederation, according to the latest statistics from the Federal Department of Finance (FDF). Their amount is around 13.9 billion francs, with the average loan amount reaching 102,000 francs.
In addition, there are 1,130 “Covid-19 Credit Plus” loans amounting to CHF 3 billion, of which only 85% are guaranteed by the Confederation.
