Inhalt

Latest developments in depositor protection

The Banking legislation has recently been revised to update depositor protection standards in the event of bank insolvency. In that context, this contribution provides a brief overview of the new provisions governing privileged deposits and deposit protection, which came into force last year in both the Banking Act (BA) and its implementing ordinance (BO).

 

Frédéric Bétrisey
Partner, Bär & Karrer Ltd                                                        
Ronny Schmid
Associate, Bär & Karrer Ltd                                                    

 

According to slightly amended article 37a(1) BA, deposits in the name of the depositor, including certain medium-term bond deposits in the depositor's name, are assigned to the second class of creditors in the case of a bank's bankruptcy, for an amount up to CHF 100,000. New provisions in the BO now define, and provide additional guidance in relation to, the meaning and scope of various terms, such as privileged depositors, amount and deposits.

 

New definitions

According to article 42c BA, the term privileged depositor designates the contracting partner in the relationship with the bank, or the depositor of medium-term notes, both as they appear in the bank's books at the time of the ordering of a protective measure according to article 26(1)(e) to (h) BA or the bank's bankruptcy. The following persons are not privileged depositors:

  • central banks or supervised financial intermediaries, whether banks, insurance companies, collective investment schemes or other domestic or foreign financial institutions;
  • banking foundations (pillar 3A foundations) recognised under LPP (law on occupational pension schemes) or vested benefits foundations recognised as such; and
  • customers of securities firms which do not maintain accounts themselves under article 44(1)(a) of the FinIA.

The privileged amount is determined by aggregating the various balances (including accrued but unpaid interest) in favour of the depositor (art. 42b BO). Mortgages, loans, overdrafts, as well as unrecognised interest and fees in favour of the bank, are not taken into account in the calculation.

Finally, the following claims of depositors are considered privileged deposits (art. 42a BO):

  • claims booked (i) as credit balances on accounts with the bank and denominated in Swiss francs or foreign currencies, or (ii) on metal accounts, provided these claims confer on the depositor an exclusive right or other entitlement to a payment in cash. Term and overnight deposits are deemed "recognized" as well.
  • bank medium-term notes (Kassenobligationen) recorded as such in the bank's balance sheet and which are deposited with the bank;
  • payments ordered by the depositor, but which have not yet left the bank or its account with a third party (clearing house or correspondent) at the time where either a protective measure under article 26(1)(e) to (h) BA or the bank's bankruptcy have been ordered, even if such payments have already been debited from the depositor's account;
  • payments in favour of the depositor, which have been credited to the bank or its account with a third party before either a protective measure under article 26(1)(e) to (h) BA or the bank's bankruptcy have been ordered, even if such payments have not been credited to the depositor's account yet.

By contrast, the following are not privileged deposits:

  • bearer debts;
  • medium-term notes which are not deposited with the bank;
  • contractual and other claims for compensation, such as claims arising from the failure to restitute deposited assets under article 16 of the BA;
  • rights or claims arising from derivatives;
  • dormant assets; and
  • claims against the bank which do not arise from banking activities.

Under the old version of the BA, claims held by several persons, such as joint accounts, gave rise to an aggregate privileged amount of up to CHF 100,000 per creditor. Under the new provisions, where a claim is held by several persons, these will be considered a single depositor and may claim the privileged amount only once, for the account of all.

 

Developments in the area of deposit protection

The new provisions clarify several aspects relating to the implementation of the deposit guarantee scheme required of all supervised banking institutions. It should be noted that this guarantee can be called in the event that a bank is insolvent and the value of its assets is not sufficient to cover the privileged deposits.

Each bank must permanently be in a position to cover 125% of the privileged amounts. This coverage must be secured by claims covered, or other assets located, in Switzerland. The bank must first join the self-regulatory system that guarantees privileged deposits (esisuisse). In the event of a bank's insolvency, esisuisse refunds the amount of the privileged deposits no later than on the seventh working day following receipt by the person designated by FINMA of the communication from FINMA announcing the ordering of the protective measure or the bank's bankruptcy. Previously, the deadline to pay out was 20 working days.

The liquidator must draw up a repayment plan, invite the affected privileged depositors to send their payment instructions, and ensure that the privileged deposits are paid out immediately, but no later than on the seventh working day following the receipt of the payment instructions. This new deadline will start to apply on 1 January 2028, i.e., five years after its entry in force.

The banks' contribution to esusisse now amounts to a dynamic 1.6% of the aggregate of all protected deposits, but at least CHF 6 billion (previously, the amount was fixed at CHF 6 billion). Before the revised provisions came into force, banks had to provide 50% of their contributions in the form of additional liquidity. Banks can now choose to secure half of their contribution either by depositing liquid and high-quality securities or cash with a sub-custodian, or by granting a liquidity loan to esisuisse.

 

 

Biographies

Frédéric Bétrisey is an attorney-at-law, partner of the law firm Bär & Karrer in Geneva. His practice covers all aspects of banking regulation and financial services, including regulations applicable to collective investment schemes and financial products. He also assists his clients in their financing transaction and in the drafting of their contractual documentation, in particular for their wealth management and investment advisory mandates. He also acts as a legal counsel for securitisation and covered bond schemes. 

Ronny Schmid is an attorney-at-law, associate of the law firm Bär & Karrer in Geneva. His practice primarily covers Swiss an international M&A transactions, private equity transactions and corporate law. He also advises private clients on estate planning.