Everyone thought that any major monetary policy surprises and/or capital controls today would come from Putin during his annual press conference. Boy were they wrong: just after 2 am Eastern, none other than the Swiss National Bank joined the ranks of the ECB in scrambling to stem the wave of capital flight, not to mention the cost of money, when it announced it too would start charging customers for the privilege of holding cash in its banks, when it revealed a negative, -0.25% interest rate on sight deposits: a step which according to the SNB was critical in maintaining the 1.20 EURCHF floor.

From the SNB:

The Swiss National Bank (SNB) is imposing an interest rate of –0.25% on sight deposit account balances at the SNB, with the aim of taking the three-month Libor into negative territory. It is thus expanding the target range for the three-month Libor to –0.75% to 0.25% and extending it to its usual width of 1 percentage point. Negative interest will be levied on balances exceeding a given exemption threshold.

The SNB reaffirms its commitment to the minimum exchange rate of CHF 1.20 per euro, and will continue to enforce it with the utmost determination. It remains the key instrument to avoid an undesirable tightening of monetary conditions resulting from a Swiss franc appreciation. Over the past few days, a number of factors have prompted increased demand for safe investments. The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and thereby supports the minimum exchange rate. The SNB is prepared to purchase foreign currency in unlimited quantities and to take further measures, if required.

The factors from the “past few days” in question that the SNB was envisioning to justify becoming the latest entrant to the NIRP monetary twilight zone: Russian capital flight. Per Bloomberg, “the SNB move follows Russia's surprise interest-rate increase this week and hints at the investment pressures that resulted after that decision failed to stem a run on the ruble. Swiss officials acted as the turmoil, along with the imminent threat of quantitative easing from the ECB, kept the franc too close to its 1.20 per euro ceiling for comfort.”