How safe are Swiss bank accounts?
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- Created: Monday, 13 October 2008 17:57
- Last Updated: Sunday, 07 December 2014 21:28
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All banks operating in Switzerland must be licensed by the Swiss Financial Market Supervisory Authority (FINMA). The FINMA, which is a member of the Basel Committee on Banking Supervision, regulates and supervises all banks in Switzerland according to the Basel Committee's standards. These standards cover not only equity and capital adequacy but also the entire scope of prudential and behavioural rules. As an additional safety measure, Swiss law demands capital adequacy standards even higher than those required by the Basel Accord. Swiss banks can therefore certainly be counted amongst the safest in the world.
What protection is afforded to investors and accounts holders in the case of the insolvency of a bank domiciled in Switzerland?
All banks domiciled in Switzerland are supervised by the FINMA (see the list of supervised institutions). The following provisions are also applicable to securities dealers.
The FINMA can launch a bankruptcy procedure against a bank when there is no prospect of redress. In case of a bankruptcy, the creditors are paid from the assets of the bankruptcy according to a priority set by law. The claims are processed into one of three legally defined classes. The principle is that first class creditors are paid before the second class creditors, and the third class creditors are paid last, provided that sufficient assets are left. The claims of third class creditors usually represent the bulk of the claims.
According to the Bankruptcy Act, the claims of the account holders are considered to be third class claims. According to art. 37b of the Banking Act, deposits and medium term notes, which are in deposit at the bank in the name of the depositors are assimilated to second class claims up to an amount of 100'000 francs per creditor. Such claims are therefore partly paid before third class claims. This preferred treatment applies to all deposits, irrespective of whether they were made in Switzerland or at a foreign office of the bank.
Funds that have been deposited at a bank by a foundation in relation with a pension plan scheme (Third pillar) pursuant to art. 82 LPP are considered as individual deposits from the beneficiaries. As such, these deposits are also preferred up to an amount of 100 000 francs per beneficiary.
The prompt repayment of the preferred deposits is facilitated by a system of deposits protection set up through self-regulation. Bank and securities dealers are legally required to comply with this deposit protection system. An agreement to this effect entered into force on January 1, 2006. Each creditor is entitled to the repayment within 3 months of its preferred claims up to an amount of 30 000 francs. Each creditor can only benefit from the system once, even in case of multiple accounts at the same bank. The benefit under this system only applies to deposits made in Switzerland.
With respect to deposited assets (e.g. share portfolio or participation of collective investment schemes), art. 37d LB states that, in case of bankruptcy, they are excluded from the bankruptcy proceeding, i.e. they are handed back to their owners. This provision applies to all deposited assets as defined in art. 16 LB.
Editor comments:
Securities belonging to customer (as reflected in the customer's custody account, including without limitation, shares bonds, debentures, debt securities, notes ,convertibles bonds, options, warrants, derivatives, both in physical or dematerialized form) do nort form part of the debtor's estate and can not be used to satisfy the Bank's creditors
