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Document Type

Case Study

Case Series

Account Guarantee Programs

JEL Codes

G01, G28

Abstract

During the Global Financial Crisis (GFC), Swiss authorities adopted changes to their deposit-insurance system, partly in response to similar measures by neighboring countries. On November 5, 2008, the Swiss finance minister announced that Switzerland would propose legislation to increase depositor coverage from CHF 30,000 to CHF 100,000 (USD 85,400). Swiss authorities also increased the maximum amount of ex-post contributions they could levy from CHF 4 billion to CHF 6 billion. The Swiss Banks’ and Securities Dealers’ Depositor Protection Association (ESI), Switzerland’s standing deposit-insurance body, administered its federal deposit-insurance system. The ESI was privately administered, was compulsory for nearly all deposit-taking institutions, and did not collect up-front fees from its members. On December 19, 2008, the legislature adopted the proposed changes, along with other measures requiring banks to hold 125% of their privileged deposits (guaranteed deposits plus deposits in foreign-bank branches) as realizable (i.e., easily sellable) assets booked in Switzerland and increasing the amount of immediate payments to depositors in the event of a bank failure. These changes were meant to be temporary and were set to expire on December 31, 2010. In 2009, the Swiss government drafted a proposal to build a CHF 10 billion ex-ante fund within 10 years, which was scrapped after the first public consultation. On January 1, 2011, the legislature extended the GFC-era changes until December 31, 2012. On March 18, 2011, it made the changes permanent. On October 9, 2008, one bank failed, costing CHF 30 million; another bank failure in 2011 cost CHF 8 million.

Date Revised

2022-07-15

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