Overnight deposits held by the Swiss National Bank plunged by 77.5 billion Swiss francs ($78.32 billion) last week, their biggest ever weekly fall, the latest sign of the central bank's switch to a more restrictive monetary policy.
Sight deposits - commercial bank money held by the SNB - dropped to 669.6 billion francs from 747.1 billion a week earlier, data on Monday showed.
Last month, it said it would resort to bonds and repos to steer the market interest rate - or Swiss Average Rate Overnight - towards its policy rate, which it raised to 0.5% from minus 0.25%.After the interest rate change, the bank's sight deposits were up to 28 times their minimum reserve level and will receive interest of 0.5%, while deposits above the level are not eligible for interest.
"Most of the decline in sight deposits is likely due to liquidity absorbing operations, repos and SNB bills," said Credit Suisse economist Maxime Botteron. SNB Chairman Thomas Jordan has said the central bank would consider selling foreign currencies if the franc weakened, especially with the franc's high value proving helpful in restraining Swiss inflation.which has switched from fighting the strong franc towards trying to tame inflation.
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