FAQ
What is the depositor protection scheme?
What is the maximum amount covered by the depositor protection scheme?
Is there a pre-financed fund for the depositor protection scheme?
Which banks are participating in the depositor protection scheme?
Does the depositor protection scheme also apply to foreign branches of Swiss banks?
Does the depositor protection scheme apply to foreign banks with a branch in Switzerland?
Which deposits are preferential?
Are deposits in numbered accounts preferential?
Are deposits denominated in a foreign currency rather than in Swiss Francs also classed as preferential?
Are deposits from vested benefits foundations preferential?
Are Pillar 3a (restricted pension scheme) contributions preferential?
Are assets in a bank deposit preferential?
Does this preferential amount apply per account or per depositor?
What are the rules for joint accounts (compte-jointe)?
What are the rules for collective accounts (collective accountholders)?
How long does it generally take for the preferential deposits to be paid out?
Who can benefit from this preferential status?
What changes will result from the revision of depositor protection as proposed by the Federal Council?
What is the depositor protection scheme?
The Swiss Federal Act on Banks and Savings Banks ("Banking Act") states that in the event of a bank collapsing, deposits of up to CHF 100,000 per depositor will be treated as preferential debt, thus taking priority over the claims of other creditors. This preferential status means that these deposits will be paid out of the insolvent bank's assets and will therefore take priority over claims by other (non-preferential) creditors. Securities dealers are treated in the same way as banks in this respect.
The depositor protection scheme for banks and securities dealers guarantees payment of these deposits up to CHF 100,000 in the event of bankruptcy or of protective measures being initiated. If the bank concerned does not have sufficient assets to pay out the deposits, the payment is guaranteed by the other banks.
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What is the maximum amount covered by the depositor protection scheme?
In accordance with the Banking Act, the maximum depositor protection amount is limited to CHF 6 billion. If the bank concerned does not have sufficient assets to cover its preferential deposits, the other banks and securities dealers will contribute up to CHF 6 billion to cover the shortfall.
The system boundary of CHF 6 billion means that the payments the banks (excluding interest) will at no point exceed the specified limit. The system ceiling does not apply per claim or for a particular period of time, but is the maximum amount guaranteed by the banks and securities dealers. This amount will decrease in the amount of the payments made by the banks and securities dealers and once increase again as the assets of the collapsed bank will have realised realised as part of the bankruptcy proceedings are returned to the banks and securities dealers or as these assets are finally written off after a bank has been fully liquidated.
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Is there a pre-financed fund for the depositor protection scheme?
No; the association founded by the banks and securities dealers does not hold assets for the purpose of guaranteeing deposits. However, the banks and securities dealers are obliged by law to hold, at any time, sufficient liquid capital to cover half of their contribution obligations in addition to the level of liquidity required by law.
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Which banks are participating in the depositor protection scheme?
All banks that have a branch in Switzerland and accept preferential deposits are required by law to participate in the depositor protection scheme. The same applies to securities dealers that hold preferential deposits from their clients in Switzerland.
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Does the depositor protection scheme also apply to foreign branches of Swiss banks?
In the event of bankruptcy of a Swiss bank, deposits held by foreign branches of this bank are also given preferential status. However, deposits held at these foreign branches are not guaranteed by the depositor protection scheme. The depositor protection scheme only covers deposits held at branches in Switzerland.
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Does the depositor protection scheme apply to foreign banks with a branch in Switzerland?
Yes; foreign banks also participate in the depositor protection scheme provided they have a branch in Switzerland and accept preferential deposits.
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Which deposits are preferential?
Any assets held in accounts in the name of the bank client are deemed to be preferential deposits. Preferential deposits do not include those held in the name of a bearer (and therefore not in the name of the bank client), but they do include medium-term notes held in the name of the depositor, even if these are claims against the bank by the bearer.
Non-preferential deposits include claims against the bank that are not related to the professional activities of a bank or securities dealer, such as claims by the bank's landlord or a contractor working for the bank or claims arising from purchase or labour contracts with the bank.
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Are deposits in numbered accounts preferential?
Yes; the Federal Financial Market Supervisory Authority ("FINMA") has stated that deposits in numbered accounts are preferential because the bank is able to assign the numbered account to a specific bank client.
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Are deposits denominated in a foreign currency rather than in Swiss Francs also classed as preferential?
Yes; preferential status applies irrespective of the currency in which the deposit is held. However, the claim is converted into Swiss francs before it is paid out.
What is the depositor protection scheme? What is the maximum amount covered by the depositor protection scheme? Is there a pre-financed fund for the depositor protection scheme? Which banks are participating in the depositor protection scheme? Does the depositor protection scheme also apply to foreign branches of Swiss banks? Does the depositor protection scheme apply to foreign banks with a branch in Switzerland? Which deposits are preferential? Are deposits in numbered accounts preferential? Are deposits denominated in a foreign currency rather than in Swiss Francs also classed as preferential? Are deposits from vested benefits foundations preferential? Are Pillar 3a (restricted pension scheme) contributions preferential? Are assets in a bank deposit preferential? Does this preferential amount apply per account or per depositor? What are the rules for joint accounts (compte-jointe)? What are the rules for collective accounts (collective accountholders)? How long does it generally take for the preferential deposits to be paid out? Who can benefit from this preferential status? What changes will result from the revision of depositor protection as proposed by the Federal Council?What is the depositor protection scheme?
The Swiss Federal Act on Banks and Savings Banks ("Banking Act") states that in the event of a bank collapsing, deposits of up to CHF 100,000 per depositor will be treated as preferential debt, thus taking priority over the claims of other creditors. This preferential status means that these deposits will be paid out of the insolvent bank's assets and will therefore take priority over claims by other (non-preferential) creditors. Securities dealers are treated in the same way as banks in this respect.
The depositor protection scheme for banks and securities dealers guarantees payment of these deposits up to CHF 100,000 in the event of bankruptcy or of protective measures being initiated. If the bank concerned does not have sufficient assets to pay out the deposits, the payment is guaranteed by the other banks.
TopWhat is the maximum amount covered by the depositor protection scheme?
In accordance with the Banking Act, the maximum depositor protection amount is limited to CHF 6 billion. If the bank concerned does not have sufficient assets to cover its preferential deposits, the other banks and securities dealers will contribute up to CHF 6 billion to cover the shortfall.
The system boundary of CHF 6 billion means that the payments the banks (excluding interest) will at no point exceed the specified limit. The system ceiling does not apply per claim or for a particular period of time, but is the maximum amount guaranteed by the banks and securities dealers. This amount will decrease in the amount of the payments made by the banks and securities dealers and once increase again as the assets of the collapsed bank will have realised realised as part of the bankruptcy proceedings are returned to the banks and securities dealers or as these assets are finally written off after a bank has been fully liquidated.
TopIs there a pre-financed fund for the depositor protection scheme?
No; the association founded by the banks and securities dealers does not hold assets for the purpose of guaranteeing deposits. However, the banks and securities dealers are obliged by law to hold, at any time, sufficient liquid capital to cover half of their contribution obligations in addition to the level of liquidity required by law.
TopWhich banks are participating in the depositor protection scheme?
All banks that have a branch in Switzerland and accept preferential deposits are required by law to participate in the depositor protection scheme. The same applies to securities dealers that hold preferential deposits from their clients in Switzerland.
TopDoes the depositor protection scheme also apply to foreign branches of Swiss banks?
In the event of bankruptcy of a Swiss bank, deposits held by foreign branches of this bank are also given preferential status. However, deposits held at these foreign branches are not guaranteed by the depositor protection scheme. The depositor protection scheme only covers deposits held at branches in Switzerland.
TopDoes the depositor protection scheme apply to foreign banks with a branch in Switzerland?
Yes; foreign banks also participate in the depositor protection scheme provided they have a branch in Switzerland and accept preferential deposits.
TopWhich deposits are preferential?
Any assets held in accounts in the name of the bank client are deemed to be preferential deposits. Preferential deposits do not include those held in the name of a bearer (and therefore not in the name of the bank client), but they do include medium-term notes held in the name of the depositor, even if these are claims against the bank by the bearer.
Non-preferential deposits include claims against the bank that are not related to the professional activities of a bank or securities dealer, such as claims by the bank's landlord or a contractor working for the bank or claims arising from purchase or labour contracts with the bank.
TopAre deposits in numbered accounts preferential?
Yes; the Federal Financial Market Supervisory Authority ("FINMA") has stated that deposits in numbered accounts are preferential because the bank is able to assign the numbered account to a specific bank client.
TopAre deposits denominated in a foreign currency rather than in Swiss Francs also classed as preferential?
Yes; preferential status applies irrespective of the currency in which the deposit is held. However, the claim is converted into Swiss francs before it is paid out.
TopAre deposits from vested benefits foundations preferential?
Yes; deposits from vested benefits foundations are deemed to be deposits from individual pension fund members/policy holders and as such are preferential. Preferential status applies (together with Pillar 3a contributions) irrespective of other contributions from the individual pension fund member/policy holder up to a maximum amount of CHF 100,000. However, the deposit protection scheme does not guarantee payment of these deposits.
TopAre Pillar 3a (restricted pension scheme) contributions preferential?
Yes; assets held in a Pillar 3a account are deemed to be preferential. Preferential status applies irrespective of other contributions from the individual depositor up to a maximum amount of CHF 100,000 (together with contributions from vested benefits foundations). However, the deposit protection scheme does not guarantee payment of these deposits.
TopAre assets in a bank deposit preferential?
No; assets in bank deposit (custody account) do not enjoy preferential status in bankruptcy proceedings. However, these assets do not form part of the bank's bankruptcy estate and are returned to the bank client in the event of bankruptcy of the bank. It must be checked, however, whether the bank can exercise a right of set-off against the custody account clients.
TopDoes this preferential amount apply per account or per depositor?
The preferential amount applies only per depositor and per bank. If a client has more than one account with the same bank, the assets are added together and the total amount deemed to be preferential is limited to CHF 100,000. If a client's assets exceed this amount, the remaining claims are treated in the same way as claims from the other creditors and fall into the third creditor class in the event of bankruptcy. The bank client receives for this claim any bankruptcy dividend payable as a result of the bank's bankruptcy proceedings.
TopWhat are the rules for joint accounts (compte-jointe)?
Joint accounts are accounts held in the name of more than one client. Swiss law stipulates that assets held in a joint account are initially divided proportionally between the clients. Next, each client's share of the assets in the joint account is added to his/hers other preferential deposits.
Example 1: Mr and Mrs Smith have one joint account with a credit balance of CHF 140,000. This balance is split 50:50 between the two. Each spouse thus has preferential deposits of CHF 70,000.
Example 2: Mr and Mrs Smith have a joint account with a credit balance of CHF 140,000. Mrs Smith also has a salary account with a balance of CHF 50,000 and Mr Smith has a savings account with a balance of CHF 20,000. All accounts are held with the same bank. In the event that the bank goes bankrupt, the credit balance in the joint account is split 50:50 between the two spouses, with each being allocated CHF 70,000. As Mrs Smith also has a claim of CHF 50,000 from her salary account, CHF100,000 of her total deposits of CHF 120,000 are given preferential status. The "surplus" CHF 20,000 falls into the third creditor class. By contrast, all of Mr Smith's CHF 90,000 (CHF 70,000 from the joint account and CHF 20,000 from his savings account) is treated as preferential as it is below the CHF 100,000 limit.
TopWhat are the rules for collective accounts (collective accountholders)?
A collective account is defined by the clients' right of joint, not individual access to the assets in the account. This gives rise to a joint claim, for example, when there is a community of heirs or a simple partnership. Swiss law states that a claim made by more than one person can be made only once for the preferential amount. This means that the maximum preferential amount that can be claimed by a simple partnership or a community of heirs is CHF 100,000, irrespective of how many people make up the simple partnership or community of heirs.
Furthermore, the collective account is to be treated as one creditor separately from the beneficial owners. Collective accountholders (such as simple partnerships or communities of heirs) are entitled to a preferential amount of CHF 100,000, even if the individual beneficial owners of these accounts make claims for their own individual preferential amounts independently. The individual deposits of a beneficial owner are not included in the deposits held in the collective account.
TopHow long does it generally take for the preferential deposits to be paid out?
Swiss law stipulates that preferential deposits must be paid out immediately from the bank's available liquid assets separately from the collocation in the bankruptcy proceedings and in the absence of any set-off of assets of the bank. Secured deposits of up to CHF 100,000 must be paid out within three months of measures being initiated by the FINMA or liquidation proceedings being commenced against the bank.
TopDoes the bank have a right of set-off against preferential deposits?
No; under the terms of an agreement by Swiss banks and securities dealers on depositor protection, banks have waived the right to offset the depositors' debts up to the maximum preferential amount. This waiver is irrevocable and is binding on executives at the bank.
TopWho can benefit from this preferential status?
All legal entities and natural persons making a claim against a bank in relation to a deposit described above can benefit from preferential status with the exception of other banks and securities dealers. Preferential status can be given to deposits irrespective of whether the person is a resident of Switzerland or abroad.
TopWhat changes will result from the revision of depositor protection as proposed by the Federal Council?
On 5 November 2008 the Federal Council issued a communication on increasing depositor protection. The draft law was adopted by the Federal Assembly on 19 December 2008. The amendments, which came into force on 20 December 2008, include the following:
- An increase of the preferential amount and depositor protection from CHF30,000 to CHF 100,000 per creditor.
- The creation of a special additional preferential amount of CHF 100,000 for vested pension benefits and restricted pension assets (Pillar 3a) per person;the depositor protection scheme does not guarantee payment of these deposits, however.
- The requirement for banks to have the preferential deposits secured by claims against third partied secured in Switzerland or by assets in Switzerland in the total amount of at least 125% of the preferntial deposits held with the bank. The FINMA may increase the required percentage or grant exceptions to this requirement.
- The immediate direct payment of all preferential deposits up to the maximum amount set by the FINMA from the liquid assets of the collapsing bank (excl. claims for vested pension benefits and Pillar 3a assets, which are not paid out and are instead credited), not only of the "smaller deposits" of up to CHF 5,000 at it used to be the case.
- An increase in the system boundary from CHF 4 billion to CHF 6 billion.