Switzerland's central bank announced on Monday that it is set to increase the minimum reserve requirement for domestic banks and, as such, will amend the National Bank Ordinance as of 1st July.

"These adjustments will ensure that implementation of the SNB's monetary policy remains effective and efficient," the Swiss National Bank (SNB) said in a statement.

The central bank went on to add that liabilities from cancellable customer deposits, excluding tied pension provision, will now be fully included in the calculation of the minimum reserve requirement, just like other relevant liabilities, Reuters news agency reports.

The SNB continued that this revokes the previous exception where only 20% of such liabilities counted towards the calculation. The Swiss National Bank is also increasing the minimum reserve ratio from 2.5% to 4%.

Furthermore, the bank noted that since sight deposits held by banks to meet minimum reserve requirements are not remunerated, the interest costs for the SNB will be reduced. It further stated that these amendments would not affect its current monetary policy stance.

Chairman of the Swiss National Bank, Thomas Jordan had stated in a newspaper interview back in November that the bank was assessing whether it needed to increase banks' minimum reserve requirements.

Moreover, the central bank will save around 600 million Swiss Francs ($659.05 million) per year as a result of the changes, according to a source with knowledge of the matter.

Shares in Switzerland's largest bank, UBS dropped over 1.5% in morning trading, lagging behind its European counterparts.

According to Zuercher Kantonalbank analyst, Ausano Cajrati Crivelli, the change was significant.

"Because banks will have higher minimum reserves on which interest is not earned," he stated, adding that further analysis would be needed to assess the exact impact on lenders' profitability.