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Switzerland is Considering Limiting Withdrawals in the Event of a Bank Run

Fri 10 Nov 2023 ▪ 4 min of reading ▪ by Nicolas T.
Getting informed Regulation

Switzerland is about to introduce a law to protect its systemically important banks from Bank Runs.

Bitcoin Bank Run UBS

Bank Run

Reuters reports that Swiss authorities and banks are discussing new measures to prevent bank withdrawals. These discussions come as the giant UBS was forced to merge with Credit Suisse earlier this year.

These discussions are part of a broader review of Swiss banking rules to manage banks that are “too big to fail.” The Swiss National Bank and the Swiss Ministry of Finance have recently begun discussions with UBS and likely also with Raiffeisen Group and Zürcher Kantonalbank.

The proposed measure that raises eyebrows is to stagger withdrawals over time in the event of a Bank Run, according to one source from Reuters.

In other words, fees (likely equivalent to the bank’s losses…) will be imposed on those who want to withdraw their money immediately. This is something that is being considered.

Another proposal is to reward customers who hold onto their savings for longer by offering them higher interest rates. Similar to life insurance policies, there would be penalties for early withdrawal.

All of these plans are not really good news for savings.

Bitcoin to protect against bank failures

Customers of Credit Suisse withdrew the equivalent of $72 billion in the first quarter of 2023 alone. This comes after $111 billion was withdrawn in the previous quarter.

For more context, it should be noted that Credit Suisse has been the subject of investigations and has been convicted several times in recent years. Some of its employees have even been imprisoned for various money laundering, corruption, tax evasion, and industrial espionage scandals.

Business as usual, one could say. The withdrawals actually started at the end of 2021 due to heavy losses related to the collapse of investment funds Archegos and Greensill Capital.

“The case of Credit Suisse clearly showed that withdrawals can now be much faster and larger than existing regulations allow,” said Thomas Jordan, President of the Swiss National Bank last week.

The fact that authorities are considering limiting bank withdrawals is concerning. The fear of banking crises is palpable at the highest levels.

And what could be more normal given the rise in interest rates, escalating geopolitical tensions, and the increasingly prominent energy crisis…

Who will buy UBS in the event of a Bank Run? The central bank? According to the latest European rules, it is now forbidden to save banks without them absorbing some of their losses with their clients’ money beforehand.

Yet another good reason, if one was needed, to hold savings in your head (12 words are enough) thanks to bitcoin…

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Nicolas T. avatar
Nicolas T.

Bitcoin, geopolitical, economic and energy journalist.

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.