Private Banking in Switzerland

Private Banking is commonly “for the rich”; the reason to this is that in order to start a customer relationship, the client’s investment capital or equity has to be of a significant size. This capital may vary from bank to bank. In the classic Swiss banks an initial capital of CHF 1-2 million is required. It can be either in cash or in securities.

What is Private Banking?

Private Banking consists of an exclusive and tailored investment advice, which is only offered to a certain customer group (usually wealthy customers). That is, an advice which is based on the specific customer and his/hers wishes for the future. Private Banking banks do not offer salary accounts, budget accounts, overdraft facilities or business accounts. The product offering is narrow but highly specialized within asset and wealth management and yield optimization.

Large return of the investment

Most people who are contemplating about moving abroad, or who have already moved abroad, have up to that time made use of Private Banking to help investing. However, it is not insignificant to have a bank number two, to care for the same investment. In this situation, Swiss banks are often used since Switzerland has many years of investment experience, political stability and a strong currency.

The banks in Switzerland

For affluent individuals, it has been common for many years to use Private Banking banks in either Luxembourg or Switzerland. In these exclusive banks, it is possible to start a customer relationship if you invest CHF 1-2 Millions. A few years ago, the number of banks in Switzerland was near 600. Today, there are only 275 according to Swiss Banking. The 275 banks are:

2 big banks

24 cantonal banks

118 foreign banks

1 Raiffeissen group

60 other banks including 47 specialized in asset and wealth management

63 regional banks and savings banks

7 private banks

Number Account in Switzerland

In many Swiss banks, it is the norm to set up accounts with a number instead of a name. Thus, it is a pseudonym for the protection of the privacy of the holder. In Switzerland, you strongly cherish anonymity; a mindset that can be remote for foreigners.

How safe are the money in the Swiss banks?

What happens to the depositor’s money if a Swiss bank goes bankrupt?
The Swiss Financial Supervisory Board called “Bankenaufsicht” or FINMA is very strict and this is exactly the reason why risks in banks in Switzerland are limited. Should it despite the strict control happen that a bank goes bankrupt, the depositors’ money is guaranteed under the rules of the Swiss “Bankengesetz” in which the Swiss deposit guarantee is described; also called “Einlegerschutz”.

Depositor protection in Switzerland is CHF 100,000

In the Swiss bankruptcy law, it is described that depositors are covered with up to CHF 100,000 since the 22nd of December 2008 (previously CHF 30,000) per person. The advantage is that depositors get their money before the majority of the unsecured debts are settled. This means that the probability that the payment is carried out is close to 100%.

CHF 100,000 per person, not per. account

Protected up to CHF 100,000 per. person (not per. account) is the deposited sum in salary accounts, savings accounts and pillar 3a (pension). What is unique is that the so-called special deposits also fall into bankruptcy, whereas in Denmark this money is not affected by a possible bankruptcy. Regarding funds invested in securities, such as stocks or mutual funds, it applies that these do not fall in the bankruptcy substance since they are logged to a securities depot instead of a normal account.

Example of bankruptcy in Switzerland

A customer has a bank commitment consisting of a salary account of CHF 50,000, a savings account of CHF 50,000 and a pillar 3a of CHF 75,000; in total CHF 175,000. If the bank goes bankrupt, the depositor’s capital secured is CHF 100,000 and the customer receives a loss of CHF 75,000. A GOOD ADVICE: if the depositor had decided to create his column 3a in a life insurance company, these funds are 100% reinsured, ref. the Insurance Contract Law in Switzerland, and the customer did not have to suffer any loss from the bankruptcy.

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