Depositor Protection

Depositor protection (or “deposit protection”) is a guarantee provided by a government or private agency which insures the assets deposited in bank accounts.

In Switzerland, the primary depositor protection scheme is administrated by esissuisse, an association formed in 2005. All FINMA regulated securities brokers and banks registered in Switzerland are members.

Swiss banking law requires that Swiss banks and securities brokers provide high levels of security for certain categories of deposits.

In practice this means that, if one bank goes bankrupt, all remaining Swiss banks pitch in to provide a minimum amount of compensation to bank customers (when the bank in question cannot provide compensation out of its own liquid assets). Payments to affected customers should be delivered within one month.

However, only up to 100,000 franks of deposits per customer and bank (not per bank account) are protected.

Example: If your deposits at a failed bank are made up of 90,000 francs kept in a savings account, 80,000 in a separate investment savings account, plus bank bonds (medium term notes) worth 30,000 francs, the deposit protection guarantee only insures 100,000 francs of these assets (not the full 200,000 francs).

The total compensation payable by this deposit insurance is another important limitation: Currently the limit rests at 6 billion francs – regardless of the number of bank failures.

Whether you reside in Switzerland or abroad, medium term notes held in your name, along with deposits in your Swiss checking, savings, numbered and business accounts are both privileged and protected.

Important: Deposits in pillar 3a retirement accounts and vested benefits accounts are also privileged, but they are not covered by deposit protection. These deposits are privileged in that they fall into the second priority category of bankruptcy repayment obligations. This increases your chance of being repaid, compared to if those losses were placed in the standard third priority category.

Securities are not deposits and as such, they are not protected. But because you are the legal owner of your securities, you retain all rights over them during a bank failure. You can simply transfer them to another custodian bank.

More on this topic:
What is a sight deposit?
Swiss savings accounts compared
Find the right Swiss bank account
Medium term notes compared
Bank failures: What happens to your money?

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