Swiss depositor protection

Protection through the Swiss Banking Act

Assets managed by a Swiss SEC RIA and held at a Swiss custodian bank are protected to a certain extent, yet not to the same degree as with the FDIC in the United States.

The "Swiss Banks' and Securities Dealers' Depositor Protection Association" was formed in Basel in 2005 with the aim of implementing the self-regulation measures laid down in Art. 37h of the Swiss Banking Act in the event of a forced liquidation or imposition of protective measures. The association has operated under the esisuisse brand since 2012.

The depositor protection set-up has been responsible since 2005 for ensuring that clients' deposits at Swiss banks are protected as provided for in the Swiss Banking Act.

In the event of forced liquidation

In the event of a bank going bankrupt, all esisuisse members (all banks with branches in Switzerland) will transfer to esisuisse within five days the amounts required of up to a total amount of CHF 6 billion. Clients will receive up to CHF 100,000 of their savings.

Who is protected by esisuisse?

All legal entities and natural persons with deposits at banks in Switzerland are protected by esisuisse under the terms of the provisions shown at esisuisse.ch with the exception of other banks and securities dealers. Preferential treatment and protection are granted regardless of whether the entity/person is domiciled in Switzerland or abroad.

When does the depositor protection scheme have to spring into action?

Whenever FINMA, the Swiss Financial Market Supervisory Authority comes to the conclusion that a bank is no longer capable of carrying on its business, it imposes a so-called protection measure. The system is then immediately activated and esisuisse calls in the required funds from its banks and securities dealers.

What are preferential deposits?

When a bank becomes bankrupt, bank deposits of up to CHF 100,000 per depositor and bank are given preferential treatment. Preferential treatment means that these deposits form part of the second creditor class. This is of great advantage when it comes to distributing the bankrupt institution's liquidity, as the first and second creditor classes normally only represent a small portion of the claims against bankruptcy assets. By far the largest portion of claims is usually allocated to the third creditor class.

Preferential deposits are deemed to be:

  • Balances on accounts held in the name of the bank client
  • Medium-term notes held in the name of the bearer at the issuing bank, even if these are claims by the bearer against the bank
  • Restricted pension deposits (Pillar 3a)
  • Contributions of vested benefits foundations
  • Deposits held at foreign branches of the bank in question

What are protected deposits?

A large portion of preferential deposits are protected by the statutory esisuisse Deposit Protection Scheme. esisuisse, i.e. all of its members (all banks and securities dealers in Switzerland), make money available for these protected deposits to ensure the prompt payment to entitled creditors in the event of a bank going bankrupt. Accordingly, the following preferential deposits are protected by esisuisse up to a maximum of CHF 100,000:

Balances of private individuals, commercial enterprises and public-sector offices; e.g. personal accounts, savings accounts, investment accounts, salary accounts, numbered accounts, deposit accounts and current accounts, medium-term notes held in the name of the bearer at the issuing bank.

Does this preferential treatment and protection apply per account or per depositor?

The preferential treatment and protection applies only per depositor and bank. If a client has more than one account with the same bank, the balances are added together, with the total amount deemed to be preferential and protected limited to CHF 100,000. (Details on the rule concerning vested benefits foundations may be found under "Are deposits from vested benefits foundations preferential?" Information on the rule concerning Pillar 3a deposits may be found under "Are Pillar 3a deposits preferential?"). If a bank client's assets exceed this amount, the remaining claims are treated in the same way as claims from other creditors and are allocated to the third creditor class in the event of bankruptcy. As a result, the bank client receives for this claim any so-called bankruptcy dividend payable as a result of the bank's bankruptcy proceedings.

Are securities in a securities account (shares, fund units, certificates etc.) protected or preferential?

Neither one nor the other, as securities are not deposits. They are only held in custody by the bank but are the property of the client. In the event of a bank going bankrupt, the bank’s clients can demand their securities back from the bank or transfer them to another institution. It must be checked, however, whether the bank can exercise a right of set-off against the custody account clients.

Text source: esisuisse

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