Esisuisse is an insurance scheme which provides depositor protection for the balances of bank accounts at Swiss commercial banks. The scheme, which operates as a foundation, was established in Basel in 2005 by the Swiss Bankers Association.
The scheme guarantees the repayment of medium-term note principal and private account, savings account, numbered account and business account balances owed by bankrupt Swiss banks to their depositors, within certain limits.
The degree to which balances are protected depends on the volume of total, combined balances owed by a bank to its depositors.
A bank is not a vault in which money is held on behalf of depositors, but a commercial business which invests money on behalf of depositors and provides financial services.
Base money deposited at a commercial bank is used for commercial banking activities such as investments in loans, securities and other investment vehicles. It is also used to cover the bank’s running expenses.
Because of this, the actual amount of money held by a bank at any one time makes up only a small fraction of the amount of money owed to depositors who hold accounts at the bank (book money). If a bank is unable to meet the demand for repayment of its debts to depositors, it becomes insolvent.
When a bank which participates in the the Esisuisse scheme becomes insolvent, the mutual depositor protection scheme managed by Esisuisse covers up to 6 billion Swiss francs of the debt owed by the bank to its customers.
A maximum of 100,000 Swiss francs per depositor is guaranteed by the scheme. If the per-bank limit of 6 billion francs is not sufficient to cover 100,000 francs per depositor, then the per-depositor limit is adjusted to match the maximum per-bank limit.
Example 1: A bank has 500,000 depositors who hold a total of 100 billion francs (average 200,000 francs each) in private and savings account balances, business account balances and medium-term notes. The bank becomes insolvent and subsequently files for bankruptcy. The Esisuisse scheme covers 6 billion francs of the bank’s debt to its depositors. Because the bank has 500,000 depositors, the scheme repays 12,000 francs of the debt owed to each customer (CHF 6 billion depositor protection per bank / 500,000 depositors = CHF 12,000).
Example 2: A small bank has 40,000 depositors who hold a total of 8 billion francs (average 200,000 francs each) in private and savings account balances, business account balances and medium-term notes. After the bank becomes insolvent and subsequently files for bankruptcy, the Esisuisse scheme covers 6 billion francs of the bank’s debt to its depositors. Because the bank only has 40,000 depositors, its depositors benefit from the maximum protection of 100,000 francs per depositor (CHF 6 billion depositor protection per bank / 40,000 depositors = CHF 150,000 capped at limit of CHF 100,000 per depositor).