Banking Act: Federal Council initiates consultation on partial revision of the provisions regarding Bank Restructuring, Deposit Insurance and Segregation of Client Securities

Dr. Günther Dobrauz Partner and Leader Legal, PwC Switzerland 15 Mar 2019

On March 8th, 2019, the Federal Council has initiated the consultation on a partial revision of the Banking Act. The revision envisages amendments in the areas of bank restructuring, deposit insurance and segregation of intermediated securities. The consultation will end on June 14th, 2019.

The proposed amendments to the Banking Act cover the following three essential topics:

  • Improvement of legal certainty for bank restructuring: Up to the present, FINMA’s Banking Insolvency Ordinance has governed the legal procedure during a bank insolvency. To better protect constitutional rights of owners and creditors of the bank, it is proposed to transpose the fundamental clauses into the Banking Act and thus give them a higher legitimation. In particular, capital measures in the context of a bank restructuring (such as bail-in and debt reduction) are to be stipulated in the Banking Act. Alongside this, the Mortgage Bond Act shall be amended to ensure a higher stability of the Swiss mortgage bond system.
  • Improvement of the deposit insurance: The time frame to pay out funds from the deposit insurance to the bankruptcy liquidator will be reduced from twenty to seven days. The subsequent payment to the depositor has to take place during a period of maximum seven further days. Additionally, banks will be required to deposit half of their contribution obligation as security in the form of either Swiss Francs or high quality liquid securities, or to grant a loan of this amount to the deposit insurance institution.
  • Segregation of own holdings and client holdings: The Intermediated Securities Act is to be amended to the effect that custodians must keep their own holdings segregated from the holdings of third parties in their books. If an inland third party custodian is mandated, the segregation has to be ensured as well. If the custody chain crosses the Swiss border, the last Swiss custodian has to take reasonable measures to ensure segregated custody with the first foreign custodian.

Besides the Banking Act, the Mortgage Bond Act and the Intermediated Securities Act will be particularly affected by the envisioned revision. The addressed topics have already been picked up during the development of the Financial Services Act and the Financial Institutions Act, but have then been dispatched into a separate consultation process.

 

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Dr. Günther Dobrauz

Partner and Leader Legal, Zurich, PwC Switzerland

+41 58 792 14 97

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Dr. Jean-Claude Spillmann

Director, Head Asset & Wealth Management and Banking Regulatory, Legal, Zurich, PwC Switzerland

+41 58 792 43 94

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