RTRS:Swiss sight deposits hit 5-month high on euro fear
(Reuters) - The amount of cash commercial banks hold with the Swiss National Bank rose to a five-month high in the seven days to June 1 as market unease about the euro zone's debt crisis intensified.
The level of cash deposits is partly a reflection of how strongly banks want to keep their money safe and may also reflect efforts by the Swiss National Bank to defend its cap on the value of the Swiss franc.
The sight deposits of domestic banks rose to 179.06 billion Swiss francs ($184 billion) in the week to June 1, from 171.655 a week earlier, Swiss National Bank data showed on Monday. That was the highest since the week of Jan. 6, when they were at 179.884 billion.
It was the fourth consecutive week that the deposits had grown.
Sight deposits are the accounts of commercial banks with the central bank, and constitute a large part of the liquidity in the banking system. As part of its efforts to weaken the franc, which nearly shot to parity with the euro last August, the SNB began flooding the money market with cash and raised total sight deposits to 200 billion.
Total sight deposits amounted to 252.3 billion francs at the end of last week, the data showed.
After trying to push down the franc by expanding sight deposits, the Swiss National Bank capped the Swiss unit at 1.20 per euro on Sept. 6, seeking to deter investors looking for a haven from the euro crisis. The SNB cited the risk of deflation and a recession as the reasons for the cap.
With markets increasingly worried the euro zone crisis could engulf Spain, the franc has been trading just shy of the 1.20 per euro mark.
The SNB's tools for expanding sight deposits are foreign exchange swaps and repurchases of its own debt.
At its most recent policy review in March, the SNB said it would maintain liquidity at extraordinarily high levels.
SNB data - particularly its foreign currency reserves - are closely scrutinised by investors for signs of how much it is costing to maintain the cap. In 2010 the SNB ran up huge losses due to its interventions to stem the franc's rise. ($1 = 0.9713 Swiss francs) (Reporting by Catherine Bosley; Editing by Ruth Pitchford)
