Swiss Authorities Back up Banking Protection

Contributing Editor

27 July 2005

The Swiss Bankers Association yesterday said depositor protection is to be beefed up by new regulations due to come into force at the beginning of next year which will ensure preferential treatment in all bankruptcy cases. The revised Depositors’ Protection Agreement will also be applicable to non-bank securities dealers. According to the SBA, depositor protection in Switzerland rests on two pillars: the legally-required bankruptcy privilege of SFr30,000 ($23,026) per person, and a self-regulatory mechanism to advance liquidity to ensure payment of legally privileged claims within three months. The SBA said both these laws are now to be extended, with the concept of “privileged claims” being extended to apply to all deposits and not just certain kinds of accounts as has been the case until now. This will significantly strengthen depositor protection, said the SBA. The Swiss Banking Act also guarantees depositors the right to payment of their legally privileged claims within three months. Finally, according to the SBA, whereas the old Depositor Protection Agreement set a total maximum amount of SFr1 billion for advance payments by banks, the amount will now rise to a maximum of SFr4 billion. The revised Depositor Protection Agreement and the revised articles to the Banking Ordinance are due to come into force on 1 January 2006. The vehicle for depositor protection will be a new body for banks and securities dealers due to be founded explicitly for this purpose later this year.