FNG Exclusive… FNG has learned that Luxembourg based Swissquote Europe Bank SA, the online banking and brokerage business formerly known as Internaxx, has sent a note to clients indicating that negative interest rates will apply to large EUR denominated cash balances. Most Swissquote-Internaxx client balances are held in EUR.

Swissquote acquired Internaxx last year for €28 million.

Until now, Swissquote-Internaxx only charged negative interest rates on client deposits in SEK (Swedish Krona) and CHF (Swiss Francs) at -1.25% regardless of cash balance size, with other currencies at 0%. However given the continued weakness in Euro zone interest rates, Swissquote-Internaxx informed clients that EUR cash balances of greater than €250,000 will be subject to negative interest, calculated as the ECB deposit rate minus 0.25%, or currently -0.75%.

Swissquote-Internaxx clients have some time to adjust, with the EUR negative interest rates regime set to kick in as of August 1.

Negative interest rates can occur when demand for loans in a particular currency is very low. That typically happens during times of low (or zero) inflation coupled with low or negative economic growth. Those conditions existed in much of the Eurozone even before the current Covid-19 crisis hit, and of course has been exacerbated by the economic effects of the pandemic. With banks charging their depositors interest on deposited monies, clients are thus incentivized to not keep their money at the bank.

The acquisition of Internaxx seems to have worked out very well for the Gland, Switzerland based Swissquote. Swissquote has a strong share of the Swiss-based online trading market and is also popular in certain other corners of Europe, but Internaxx has added another element with its popularity among the large European expat crowd. Swissquote shares (SWX:SQN) have more than doubled since closing the Internaxx acquisition in early 2019, hitting an all-time closing high yesterday of CHF 83.30, giving Swissquote a market cap of about CHF 1.3 billion (USD $1.35 billion). Swissquote recently reported a 40% rise in revenues so far in 2020.