In a speech this afternoon the President of the Swiss national Bank (SNB), Thomas Jordan, defended, decided in the negative key interest rate of the Institution. Due to this measure, the SNB is becoming more and more the criticism. Nowhere else the interest rate is so low in the Minus like in Switzerland with a minus 0.75 percent. The hardest Wind of the SNB, contrary to blows at the moment on the part of the banks. It is claimed in a new study by the bankers Association, the damage of negative interest rates is now bigger than you, and you would have to be repealed.
Jordan intended with his speech, however, not to the banks, but to the pension funds. Specifically, he explained at a meeting of the pension Fund network in Bern. It is a platform to ask the second pillar, in which 17 workers ' organizations are involved, representing a total of 600’000 members. The harmful effect of negative interest rates on the yields of the pension funds provides a critique of the monetary policy with special vigor.
In his lecture, Jordan does not dispute the harmful effects of negative interest rates. But unlike the bankers Association and other critics of the SNB's policy, he comes to the conclusion that the Use of this measure exceeds the cost of still. This assessment would be assessed at the SNB, particularly thoroughly. The most recent assessment of the situation in September was, "that the negative interest and the willingness to intervene in the foreign exchange market, continue to be indispensable to the pressure on the Swiss franc to counteract and thereby stabilize the price development and to support economic activity," said Jordan, according to the speech text.
the pension funds contacted, said Jordan, the limited be of influence of the SNB on the success of the pension funds, and do not belong to the tasks of the Central Bank: "The Swiss national Bank is for the monetary policy of our country is responsible and not for the social policy and thus for the provision of the works." However, he noted the importance of the question: "A healthy Pension is a core element for a good social cohesion and a building block of the success of Switzerland as a model," he said.
The pension funds would benefit from the SNB's policy, if the SNB fulfilled its mission to ensure price stability. Otherwise, the purchasing power would sink to the accumulated pension capital. The pension funds would also be little of it, if the national Bank would raise interest rates in the current environment, again in the positive range. According to Jordan, the opposite would be the case: The result is a further appreciation of the Swiss franc, a blocked economy, and a significant increase in unemployment would be. This would lead to lower payments into the funds.
Because such an economic crisis would generate pressure on the (long-term) interest rates and the equity markets, one could expect no improvement in the earnings situation in funds. In conclusion, Jordan said: "A lifting of the negative interest rate at the present time would, therefore, in the interest of the pension funds." The critics of the negative interest however, some of the Jordan represented the causal relationships in question: about whether or not the negative interest rates actually prevent an appreciation or whether a moderate further appreciation of the Swiss franc, the economy will actually topple in a crisis would be.
Jordan was in his presentation of the two claims, which were levied for the relief of the pension funds already in a pension with an account will be exempt in the case of the SNB negative interest rates; on the other, that the proceeds from the negative interest rate could be left to the funds. Two concerns of the SNB President, issued a clear rejection.
exemption of pension funds would reduce according to Jordan, the effect of negative interest rates "sensitive". Because this interest rate policy produces the desired effect, should be charged the negative interest rate is possible to cover the area of the current accounts at the SNB. A payment of the proceeds from the negative interest rates would lead to a conflict of objectives between a non-SNB incumbent socio-political task with its monetary policy. In addition, this would reduce the payout to the Federal government and the cantons, "in the end, that would be a zero-sum game," said Jordan.
In recent years, the revenue from the negative interest rates amounted to about 2 billion Swiss francs. In the first nine months of this year, there were 1.7 billion, the SNB announced yesterday. In the future, it will not be much more than a billion Swiss francs per year, because the SNB has increased the amounts for the current accounts of the banks, which remain unaffected by the negative interest rates freed.
Finally, Jordan said, the pension funds are also required regardless of the Central Bank policy and forced adjustments in their business model. The interest rates are terms no longer for structural reasons, worldwide in the Fall. Would it pressed, especially by the higher Saving for a longer life expectancy, but also due to lower investment and a decline in the productivity of the economy. In contrast to the decline in yields on the Savings of the longer life expectancy increases the liabilities of pension funds to the pensioners. to improve
in order To be able to have pension funds taken positive measures, for example by investing more in equities or real estate, and abroad, in order to generate higher returns than investments in government bonds. However, with these measures, the problems for the funds could not be addressed due to the longer life expectancy. In addition, be connected with such investments, higher risks and fluctuations in income.
As a possible long-term solution to the Dilemma of pension funds, Jordan brings higher contributions from employees and employers, a reduction of the services or the time for this. A silver bullet does not exist, unfortunately. It is not likely that this message reaches the employee representatives in the audience very well.
Created: 31.10.2019, 16:52 PM