Basel, 26 July 2005 – Depositor protection in Switzerland is governed not only by the Swiss Bankers Association’s self-regulatory Depositor Protection Agreement but, since 1 July 2004, has also been codified in the Swiss Banking Act with a few additional obligations. All the new obligations required by the Banking Act are now being implemented jointly by the Swiss Bankers Association and the Swiss Federal Banking Commission. New regulations are due to come into force on 1 January 2006 and will significantly strengthen depositor protection in Switzerland. Preferential treatment in the event of bankruptcy is being extended to cover all deposits and not just certain types of accounts as has been the case until now. The revised Depositors’ Protection Agreement will also be applicable to non-bank securities dealers.

One of the main aims of banking law is to protect depositors. This is vital in maintaining public confidence in one’s banking system and this confidence in turn makes a crucial contribution to the reputation of a financial centre. With a view to strengthening this confidence, in 1984 the Swiss Bankers Association (SBA) drew up a self-regulatory Depositor Protection Agreement with its member banks. This Agreement guarantees that, in the event of a bank failure, depositors will rapidly receive their legally privileged claims. The Depositor Protection Agreement was last revised in 1993. Since 1 July 2004 its principles have been given a legal basis in the Banking Act. The Banking Act added a few more obligations, and these are now being implemented by the SBA together with the Swiss Federal Banking Commission (Switzerland’s banking regulator). Depositor protection in Switzerland rests on two pillars: the legally-required bankruptcy privilege of CHF 30,000 per person, and a self-regulatory mechanism to advance liquidity to ensure payment of legally privileged claims within three months. Both these pillars are now to be extended. For example, the concept of “privileged claims” is 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. The Banking Act also guarantees depositors the right to payment of their legally privileged claims within three months. The new regulations will also be applicable to non-bank securities dealers. Finally, whereas the old Depositor Protection Agreement set a total maximum amount of CHF 1 billion for advance payments by banks, the amount now rises to a maximum of CHF 4 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.

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Contacts
Thomas Sutter	James Nason
Head of Communications Switzerland	Head of International Communications
Swiss Bankers Association, Basel	Swiss Bankers Association, Basel
Tel. +41 61 295 92 06	Tel. +41 61 295 92 15
Fax +41 61 272 53 82	Fax +41 61 272 53 82
www.swissbanking.org	www.swissbanking.org