Partial revision of the Banking Act 

With the partial revision of the Banking Act, the Federal Council intends to achieve further improvements to the protection of customer deposits at commercial banks. The revision addresses three areas in which the proven system for protecting savers can be strengthened in a targeted manner. 

The Swiss financial centre’s system of customer and depositor protection has already shown itself to be effective. Its two main aims are to protect depositors against losses (“customer protection”) and to exert a stabilising influence by building trust and helping to prevent a “run on the bank” (i.e. a sudden, mass withdrawal of customer deposits) in the event of a crisis. The requirements of Swiss banking regulation are very stringent by international standards and provide a solid foundation for the financial centre, ensuring that banks and thus also customer deposits are secure. Strict rules on capital adequacy, liquidity and risk-spreading make Swiss banks exceptionally robust compared with their international peers, a fact the authorities recognise (see e.g. FINMA press release dated March 19, 2020).

An extensive and effective apparatus for protecting deposits is already in place.

However, work needs to be done in certain specific areas to strengthen and optimise it. The partial revision of the Banking Act proposed by the Federal Council is intended to enhance the deposit insurance, insolvency and segregation regimes, further improving the functioning and credibility of the deposit insurance scheme, moving key provisions on insolvency for banks into the Act, and guaranteeing the complete segregation of intermediated securities in the custody chain (“segregation of securities for the purposes of the Debt Enforcement and Bankruptcy Act”).

Deposit insurance

The Swiss deposit insurance system has proven its worth, and the partial revision of the Banking Act will bring targeted improvements in three areas:

The partial revision of the Banking Act will bring targeted improvements in three areas

Insolvency and restructuring

The provisions on insolvency for banks are to be transferred from the ordinances to the Banking Act. Many of the rules are currently contained in FINMA’s Banking Insolvency Ordinance (BIO-FINMA).

Segregation

The complete segregation of intermediated securities in the custody chain is to be guaranteed (“segregation of securities for the purposes of the Debt Enforcement and Bankruptcy Act”).

The SBA’s position

The Swiss Bankers Association acknowledges the need for action regarding certain aspects of deposit insurance, insolvency and segregation. The measures envisaged have the potential to increase the existing level of protection further. In the interest of maintaining the high stability of the Swiss financial centre, the industry is willing to contribute to these improvements by accepting the extensive and costly process adjustments they entail. However, the SBA calls for targeted amendments to address specific weaknesses, in particular to avoid additional regulatory costs due to the new ex-ante financing component.

Experts

Carina Schaller
Head Political Affairs
+41 58 330 62 38