UBS, Switzerland's biggest bank, said on Tuesday it would start charging financial institution clients for cash balances held in Swiss francs, adding to measures imposed last year to control inflows into clearing accounts, Bloomberg news agency reported.

The charge, which will be communicated individually to clients within days, will be levied from Dec 21, the Zurich- based lender said in a notice via the Swift system. The company cited "continued prevailing market situation affecting the Swiss franc" for the move.

UBS has been levying a "temporary excess balance fee" since August 2011 in cash clearing accounts where net inflows were above a certain undisclosed threshold. Credit Suisse, the second-biggest Swiss bank, said last week it would start imposing negative rates on cash clearing accounts in francs and other currencies above a certain threshold as of Dec 10.

UBS and Credit Suisse are cutting risk-taking and reducing their balance sheets to meet stricter capital requirements from regulators. The franc deposits held for other banks use up capital and introducing negative rates allows a lender "to make money," said Mr Geoffrey Kendrick, head of European currency strategy at Nomura International in London.

The franc weakened 0.3 per cent to 1.2113 against the euro after the notice from UBS.

TODAY