Changes to Swiss banking laws will ensure that deposits remain protected for up to SFr100,000 (about $90,000) and force banks to cover 125 per cent of client deposits through assets located in Switzerland.

The Swiss Federal Council, the country’s government, has announced that emergency deposit protection rules will be merged into the Swiss banking act. Until this takes place, the emergency laws, which already increased the deposit protection to SFr100,000, will remain in place.

The new laws come against a background of attempts by governments around the world to bolster confidence in the strength of the banking system following the recent financial turmoil.

After a consultation process in March this year, the Federal Council decided not to overhaul the deposit protection rules quite as radically as originally proposed. The rejected plans included, for example, establishing a public deposit guarantee fund (more here).

This revision of the banking law will lead to a permanent increase of protected deposits to SFr100,000. Due to the emergency laws, which were implemented because of the financial crisis in 2008, this is already the case. Prior to the crisis, however, only SFr30,000 was protected by law.

The new rules will also require banks in Switzerland to cover 125 per cent of client deposits through Switzerland-based assets. A spokesperson for the State Secretariat for International Financial Matters told WealthBriefing that this requirement will not cause problems for Swiss banks. Some foreign banks with offices in Switzerland may, however, have certain problems with this rule, but these issues should be solvable quite quickly, this publication was told.

Further, the new rules will ensure a more generous immediate payment of insured deposits from the resources of banks in difficulties.

In addition, the depositor protection upper system limit will be increased to SFr6 billion. At the moment it is SFr4 billion.

The new rules will also include issues that have not been contested during the consultation process. This includes, for example, the recognition of foreign bankruptcy measures.

The deposit protection emergency laws in place at the moment, which will expire at the end of December 2010, will be extended until the new rules have been properly put into law. This is to stop deposit protection levels falling to the amounts prior to December 2008.