Depositor protection or state guarantee
Compared internationally, Swiss banks are considered to be above average in terms of security. Nevertheless, it is good to know what to expect in the worst case – if your bank goes bankrupt.
Your cash – what lawyers call sight deposits – is protected at Swiss banks. This is ensured by depositor protection. It applies to all accounts with Swiss banks. In this way, credit balances up to CHF 100,000 are protected. In return, the banks have undertaken to jointly secure the customer credit balances in the event of one of them going bankrupt. This is guaranteed by the Esisuisse association, but there is no security fund.Some banks offer even more security. The cantonal banks in particular are often provided with a state guarantee by the canton. The amount is not limited.
Securities are not deposits
Funds are not deposits with the bank. They never appear on the bank’s balance sheet. The bank keeps the fund units only for you. Even if this happens digitally today, you can easily imagine it as if you had your own safe deposit box at the bank. Your shares are in this safe deposit box. If the bank goes bankrupt, you still own the contents of the safe deposit box. No creditor of the bank may enter the vault and make use of it.
However, depending on the custody agreement, a bank may lend shares from your safe deposit box. This is called securities lending. This is common practice, especially with investment banks. It is mainly used for betting on falling prices, so-called short selling. If you want to sell a share or an ETF that you do not own, you first have to borrow this security. If the short seller gets into an imbalance and cannot return the borrowed security, it is lost for the owner.
Protection is only one side of the coin
We do everything in our power to ensure that your assets are protected in the best possible way. Depositor protection or state guarantees secure your cash holdings. Special assets and the extensive waiver of securities lending ensure security for your securities.
There is no such thing as complete and absolute security: if you want a return, you have to bear the risk. With diversification and rebalancing, we can help mitigate fluctuations and achieve the highest possible return. We do this at fees that do not detract from your return.
But we can’t change the fact that the market fluctuates.
Source in german: TrueWealth