Swiss Banking Act: Definition, History, and Key Provisions

Definition

The Swiss Banking Act (Bundesgesetz über die Banken und Sparkassen / BankG) is the principal federal statute governing the authorisation, supervision, and resolution of banks in Switzerland. First enacted on 8 November 1934, the Banking Act establishes the legal framework for the Swiss banking industry, including the licensing requirement, prudential standards, banking secrecy, depositor protection, and insolvency procedures.

Historical Context

The Banking Act was adopted in the aftermath of the 1930s banking crisis, which saw several Swiss banks fail and triggered public concern about the safety of bank deposits. The Act introduced two foundational elements: a mandatory licensing regime for banks and the formalisation of banking secrecy as a statutory obligation.

Over the subsequent nine decades, the Banking Act has been amended numerous times to reflect developments in banking practice, international regulatory standards, and the evolving structure of the Swiss financial centre. Key amendments have addressed capital adequacy, liquidity, too-big-to-fail requirements, and the regulatory framework for fintech companies.

Key Provisions

Licensing Requirement

The Banking Act requires any entity that accepts deposits from the public on a professional basis to hold a licence from FINMA. The banking licence is the most comprehensive financial authorisation in Switzerland, permitting the full range of banking activities.

The licensing requirement extends to entities that solicit deposits publicly, even if they do not actually accept deposits, and to entities that refinance themselves substantially from third parties to finance a large number of unrelated persons or enterprises.

Banking Secrecy

Article 47 of the Banking Act establishes banking secrecy as a criminal law obligation. Officers, employees, agents, and auditors of banks are prohibited from disclosing confidential client information, subject to criminal penalties including imprisonment and fines.

Banking secrecy protects:

• Account balances and transaction details
• Client identity and personal information
• Any information obtained in the course of the banking relationship

Banking secrecy is subject to important exceptions:

• Client consent. The client may waive secrecy protections
• Criminal proceedings. Swiss criminal authorities may compel disclosure through judicial process
• International cooperation. Switzerland has entered into agreements providing for the exchange of financial information with foreign authorities, including through the Common Reporting Standard (CRS) and FATCA
• AML reporting. Banks must report suspicious transactions to the Money Laundering Reporting Office Switzerland (MROS) under the AML framework, notwithstanding banking secrecy
• FINMA supervision. FINMA has access to bank information as part of its supervisory functions

The evolution of banking secrecy — from an absolute protection to a qualified obligation subject to numerous exceptions — reflects the transformation of international standards on tax transparency and financial information exchange.

Prudential Requirements

The Banking Act and its implementing ordinances establish prudential requirements for Swiss banks, including:

Capital adequacy. Banks must maintain capital ratios that comply with Basel III standards as implemented in Swiss law. Requirements encompass common equity tier 1 (CET1), additional tier 1, and tier 2 capital, plus buffers.

Liquidity. Banks must maintain adequate liquidity to meet their obligations, including compliance with the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).

Risk management. Banks must implement risk management frameworks commensurate with the nature and scale of their activities.

Large exposures. Limits on concentrated exposures to individual counterparties or groups of connected counterparties.

Depositor Protection

The Banking Act provides for the protection of bank depositors through:

Deposit protection. The esisuisse scheme guarantees eligible deposits up to CHF 100,000 per depositor per bank.

Preferential treatment in bankruptcy. Privileged deposits (up to CHF 100,000 per depositor) receive preferential treatment in bank insolvency proceedings.

Immediate availability. Banks must segregate privileged deposits to enable prompt access in the event of a bank failure.

Bank Insolvency

The Banking Act provides a specialised insolvency framework for banks, distinct from the general insolvency procedures applicable to other companies. FINMA has exclusive authority to order protective measures and bankruptcy for licensed banks.

Key features of the bank insolvency regime include:

• FINMA’s power to order restructuring proceedings as an alternative to bankruptcy
• The appointment of FINMA-directed liquidators
• Specific treatment of deposit protection claims
• Provisions for the transfer of assets and liabilities to a bridge bank

Too-Big-to-Fail (TBTF)

Following the 2008 financial crisis — and the Swiss government’s rescue of UBS — the Banking Act was amended to introduce a too-big-to-fail regime for systemically important banks. Key elements include:

• Enhanced capital and liquidity requirements for systemically important banks
• Requirements for resolution planning and resolvability
• Additional organisational requirements to facilitate orderly resolution
• Gone-concern capital instruments (bail-in bonds) to absorb losses in resolution

Relationship with Other Laws

The Banking Act operates alongside and interacts with several other financial regulatory statutes:

• Financial Services Act (FinSA) — governs conduct of business rules for banks and other financial service providers
• Financial Institutions Act (FinIA) — governs the licensing of non-bank financial institutions
• Anti-Money Laundering Act (AMLA) — imposes AML obligations on banks and other financial intermediaries
• National Bank Act — governs the Swiss National Bank’s oversight of systemically important payment and settlement systems

Significance

The Swiss Banking Act is the legal foundation upon which the Swiss banking industry — one of the largest and most important in the world — operates. Its provisions on licensing, prudential supervision, banking secrecy, and depositor protection have shaped the character of Swiss banking and its reputation for stability, discretion, and professionalism. As the financial industry continues to evolve, the Banking Act will remain the essential reference point for the regulation of banking in Switzerland.

Donovan Vanderbilt is a contributing editor at ZUG FINANCE, the Swiss private banking and fintech intelligence publication of The Vanderbilt Portfolio AG, Zurich. He covers wealth management, institutional finance, and regulatory affairs across the Swiss financial centre.