Credit Suisse to penalise franc deposits Credit Suisse is to penalise clients with short-term deposits, introducing negative rates on cash held in Swiss francs for its banking customers as it tries to shrink its balance sheet to meet new regulatory demands. Analysts warned that the move could make holding Swiss franc cash deposits less attractive for investors, who have snapped up such assets this year as a hedge against a eurozone break-up. The news caused a sharp sell-off in the Swiss franc, which suffered its largest intraday move in more than three months as investors speculated that inflows into Swiss cash accounts could be stemmed. The euro rose more than 0.3 per cent to SFr1.2096, its strongest level since October. Credit Suisse said in a statement to all its banking clients released via Swift, the payments company: "Due to [the] current market situation and after closely monitoring the situation over the course of this year, we have decided to start applying negative credit rates on cash clearing accounts above a certain threshold, as of 10 December 2012. Currencies involved, threshold and rates will be communicated on an individual basis to concerned customers during the next five business days. We invite our customers to keep cash balances as low as possible to avoid negative credit charges. The move by Credit Suisse comes as the bank faces an inflow of short-term cash deposits from other financial institutions at a time when it is attempting to shrink its balance sheet. "A lot of banks are pushing their cash holdings towards us and that is inflating our balance sheet," one banker said. The Swiss bank is under pressure from its home country regulator to shrink its investment banking business. It has said it plans to reduce its balance sheet by another SFr130bn to below SFr900bn in the next year. But it is being swamped with far more deposit money than it needs. Its core customer deposits, for example, exceeded loans it has granted by 23 per cent at the end of September, according to its third-quarter report. However, currency analysts said that the move by Credit Suisse might not dampen interest in Swiss franc deposits over the medium term. Valentin Marinov, foreign currency strategist at Citigroup in London, said that investors could reallocate their money to other Swiss banks that were not charging negative rates. He wrote in a note to clients: "Negative rates on cash balances need not be a deterrent for investors fearing currency losses following a potential escalation of the debt crisis." The move follows similar action taken in August last year by rival bank UBS, which still charges a temporary excess balance fee on cash clearing accounts above a certain threshold and encourages clients to keep balances in short-term accounts as low as possible.