ZURICH (Reuters) - Swiss bank PostFinance [PFAG.UL] will start charging private customers for holding deposits of more than 1 million Swiss francs ($1 million), it said on Friday, blaming the impact of the Swiss National Bank's negative interest rates policy.

Switzerland has the highest density of millionaires in the West, with nearly 10 percent of all households having $1 million or more. A study by consultancy Capgemini this year estimated that there were 358,400 people in Switzerland with a net worth of more than $1 million.

Almost all Swiss banks have refrained so far from imposing negative rates on ordinary retail customers, although some do for very large cash holdings by wealthy private clients.

But PostFinance, the banking arm of the Swiss Post Office, will from the start of February levy a 1 percent annual fee on deposits of above 1 million francs, it said on its website.

"The assets in all private and savings accounts will be taken into account. Most private and business customers will remain exempt from the fee on the credit balance," it said as part of a range of fee hikes and rate cuts.

"I appreciate that these measures will not be very popular amongst our customers. Nobody likes paying fees," Chief Executive Hansruedi Koeng said, reminding clients it had paid attractive interest rates and fees for years.

"We too are pained by the fact that this is no longer possible to the same extent due to negative interest rates, the lending prohibition and the costs incurred by stricter regulatory requirements," he added.

Unlike most rivals, PostFinance cannot by law make mortgage loans, which restricts its ability to offset the 0.75 percent rate the SNB charges banks for excess deposits and which has cost PostFinance more than 10 million francs this year.

But even UBS, the world's biggest wealth manager, said in September it could pass on negative interest rates to more depositors if Switzerland's central bank persists with sub-zero rates.

The SNB has since January 2015 used negative rates and market interventions to tame the Swiss franc's exchange rate, whose strength hamstrings the export-led economy.

The policy has come under fire from banks and pension funds, but has been defended by the SNB as necessary.

"The SNB takes these concerns very seriously," SNB Chairman Thomas Jordan said last month, but noted "generous" exemptions from negative rates on banks' deposits at the SNB let them decide whether and how much to pass on negative rates to clients.

($1 = 0.9872 Swiss francs)

(Reporting by Michael Shields; Editing by Oliver Hirt, Greg Mahlich)