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Workers stand at a construction site in front of the Swiss National Bank (SNB) in Zurich, Oct. 31, 2013. Reuters/Arnd Wiegmann

(Reuters) - Switzerland's central bank said it would start charging banks for deposits in francs for the first time since the 1970s, hoping to stem a flight to the safe-haven currency driven by concern over the euro zone and Russia's deepening crisis.

In a surprise statement on Thursday, the Swiss National Bank (SNB) announced it would impose an interest rate of -0.25 percent on the portion of so-called "sight deposits" -- cash commercial banks and other financial institutions hold with the central bank -- above a certain threshold.

It will come into effect on Jan. 22, when the European Central Bank holds its next meeting, fuelling speculation the ECB may start full-scale money printing then, though SNB Chairman Thomas Jordan played down the possibility of any connection.

"I don't think that's a coincidence," said Jan von Gerich, chief fixed income analyst at Nordea. "It adds to expectations that the ECB will deliver in January."

Growing worries that plunging oil prices may send the euro zone into a deflationary spiral were already expected to push the ECB to buy sovereign debt early next year, piling pressure on the franc in recent weeks.

Russia's rapidly weakening rouble and political upheaval in Greece pushed the franc up further, threatening Switzerland's export-driven economy, which sends the lion's share of its goods to the neighbouring euro zone.

"Rapidly mounting uncertainty on the financial markets has substantially increased demand for safe investments," Jordan told a news conference in Zurich. "The worsening of the crisis in Russia was a major contributory factor in this development."

The franc, the most liquid safe-haven currency after the Japanese yen, has stuck close to the 1.20 limit against the euro in the past few days, despite central bank intervention.

Jordan said the bank remained committed to buying up unlimited quantities of foreign currencies to defend its 1.20 per euro cap on the franc set at the height of the euro zone crisis in 2011.

The SNB's balance sheet is already bloated with around 460 billion Swiss francs (303 billion pounds) in currency reserves, amassed during heavy interventions in the foreign exchange markets in 2012 to defend the cap.

The charge will not be levied on the first 10 million francs that financial institutions deposit at the central bank. For those banks required to park minimum reserves at the SNB, the threshold is 20 times this base requirement, meaning that, for some, billions of francs will be exempt.

Switzerland's largest bank UBS said it was exempt, while Credit Suisse said it would be unaffected by the measures. The two banks introduced a form of negative interest rates on bank clients' franc accounts in 2012 to deter rivals from hoarding the safe-haven unit.

The franc fell after the announcement to its lowest against the euro since mid-October and to its weakest against the US dollar since May 2013. By 1200 GMT, the franc had pared some of those losses and was trading 0.3 percent lower against the euro, with some economists cautioning the effect of the SNB's measures could be limited.

"You can't steer a currency with interest rate moves alone," said Thomas Stucki, chief investment officer at St. Galler Kantonalbank. "The prospect of big profits if the 1.20 limit collapses is so great that speculators won't be deterred by negative interest rates."

NO SILVER BULLET

Geoffrey Yu, a currency strategist at UBS in London said the SNB's action should give it some breathing space in the short term. "If you hold Swiss francs right now you do have to bear a cost. New buyers will be forced to think twice," he said.

But Swissquote analyst Peter Rosenstreich described the move as "no silver bullet" and said the SNB will face pressure in the long-term to take more action.

"Clearly this was a signal to the markets that despite growing pressure on EURCHF and expectations that ECB actions will drive more capital into Switzerland, the SNB remains steadfast in defending the floor. Even becoming proactive," Rosenstreich said.

The SNB also expanded its three-month Libor target range to -0.75 percent to 0.25 percent from 0.0 to 0.25 percent previously.

Jordan told the news conference he expected the measures to remain in place for the foreseeable future. He said the SNB stood ready to take further measures, including reducing interest rates further or reducing the threshold in which the negative deposit rate is charged.

Given the oil price and uncertainty on financial markets, inflation in Switzerland could be lower next year than the -0.1 percent forecast by the SNB last week, Jordan said.

Economists have warned negative rates could be expensive for Switzerland's large banking sector and would also have an adverse effect on pension funds and money market funds.

Domestic banks held 313 billion Swiss francs in sight deposits with the SNB at the end of last week - around half the Swiss annual gross domestic product. Economists at Credit Suisse estimate the negative interest rate will be charged on about 20 to 25 billion Swiss francs of this.

Switzerland last imposed capital controls in 1972, when money surged in as the global fixed exchange rate regime broke down. But the curbs failed, and in 1978 the SNB capped the franc versus the German mark.