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UBS to charge HNW clients for accounts above 500,000 euros

Zurich

UBS GROUP AG plans to charge individual wealth clients for holding more than 500,000 euros (S$774,000) in cash, extending the fee policy to more of its rich customers as negative interest rates crunch profits.

Starting in November, the world's largest wealth manager will introduce a fee of 0.6 per cent a year, the bank said in a statement. The charge, which applies to clients of the bank's Swiss unit, is 20 basis points more than the European Central Bank deposit rate of minus 0.4 per cent. The move is set to cast a wider net over the bank's client base - previously, the threshold was one million euros.

Banks are preparing for a longer-than-expected spell of low or negative interest rates, re-igniting internal debates about how to treat customers holding large cash deposits. Passing on negative rates to wealthy individuals is a trend that is now extending to euros, as central bankers prepare new stimulus plans to reboot global growth.

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UBS's decision comes after Swiss rival Credit Suisse Group AG said it will introduce a fee of 0.4 per cent for customers with euro accounts of over one million euros from September. UBS has already said it will introduce negative rates for clients holding large Swiss franc balances, while Credit Suisse said it's also considering the step.

Lenders have long complained about low or negative interest rates, and UBS chief executive officer Sergio Ermotti warned last month that fresh interest rate easing could stoke asset bubbles.

While many banks already pass on negative interest rates to institutional clients, with balances in the hundreds of millions, they generally refrained from doing the same with wealthy clients, fearing that they would lose the business.

Julius Baer Group Ltd said last month that some customers withdrew money because of a wider application of negative interest rates to large cash holdings, mainly Swiss francs and euros. BLOOMBERG