Stacked newspapers, one of them showing the World Business section

Guide

Stock Markets & Market Events

When a stock index falls 20 percent or more below its most recent high, market convention calls it a bear market. Nobody knows in advance how far the index will fall or how long the phase will last. What can be explained is what guides the Swiss National Bank (SNB) in setting the policy rate, how the Swiss Market Index (SMI) is composed, and why securities in a custody account are protected differently from money in an account if a bank fails.

The essentials

The National Bank Act (NBA) requires the Swiss National Bank (SNB) to ensure price stability and, in so doing, to take due account of economic developments (Art. 5 para. 1 NBA). The SNB equates price stability with a rise in the Swiss consumer price index (CPI) of less than 2 percent per year. Deflation, a sustained decrease in the price level, is also incompatible with the objective.
The Swiss Market Index (SMI) comprises the 20 largest and most liquid equities from the Swiss Performance Index (SPI), the broad index of SIX Swiss Exchange. The SMI covers more than 75 percent of the free float market capitalisation of Swiss equities. SIX caps the weight of a single component at 18 percent on its quarterly adjustment dates. Between these dates the weight can rise above that.
Under the Banking Act (BankG), deposits in the client's name are preferential in a bank failure up to CHF 100,000 per client and bank, so they are paid ahead of ordinary claims (Art. 37a para. 1 BankG). If they are booked with a branch in Switzerland, the banks' deposit insurance scheme secures their payout. Its funds are limited by law (Art. 37h BankG).
Securities the bank holds in custody for the client are not part of the bank's assets. Under the Banking Act (BankG), they are segregated in a bank failure (Art. 37d BankG) and handed over to the client. If the client owes the bank money, the bank can retain the securities under a contractual pledge. If securities held in collective custody are missing, the shortfall is covered first from securities of the same kind that the bank holds for its own account, and the affected clients bear any remainder pro rata under the Federal Intermediated Securities Act (Art. 19 FISA). Segregation does not protect against price losses. For bonds or products the bank has issued itself, the client remains a creditor of the bank.

Sources: NBA Art. 5 (fedlex) · SNB, The SNB's monetary policy strategy · SIX, Methodology Rulebook Governing Equity and Real Estate Indices, version 3.40, sections 5.2 and 5.12 · BankG Art. 37a, 37b, 37d, 37h (fedlex, in German) · FISA Art. 19 (fedlex) · esisuisse, Questions and Answers (FAQ)

How the SNB sets its policy rate

To keep prices stable, the Swiss National Bank (SNB) maintains appropriate monetary conditions. It sets its policy rate and aims to keep the short-term rates at which banks borrow Swiss francs against collateral close to it. The most important of these rates is SARON, the rate for overnight money. The rate decision rests mainly on the conditional inflation forecast for the next three years. The forecast assumes that the policy rate remains unchanged over that period.

How interest rates affect bond prices

The policy rate acts on short-term rates. Rates for long maturities form in the market and do not move in step with the policy rate. For existing bonds, a change in market rates affects the price. If rates rise, the price of a bond with a fixed coupon falls, because newly issued bonds pay more. If rates fall, bond prices rise. All else being equal, the longer the remaining maturity, the larger the price move. Anyone who holds a bond to maturity receives the face value back, provided the issuer does not default.

What happens to account balances in a bank failure

An account balance is a claim against the bank. In bankruptcy the law ranks claims in classes. Up to CHF 100,000 per client and bank, with all accounts added together, the Banking Act (BankG) puts an account balance in the second class, so it is paid ahead of ordinary claims (Art. 37a para. 1 BankG). Payout is made first from the bank's available liquid assets (Art. 37b BankG). In addition, the law requires banks to hold assets in Switzerland worth 125 percent of their preferential deposits at all times (Art. 37a para. 6 BankG).

The esisuisse deposit insurance scheme

If the bank's liquidity is not sufficient, the esisuisse deposit insurance scheme steps in. It transfers the protected deposits within seven working days to the person FINMA has appointed for the proceedings (Art. 37h para. 3 BankG). The ceiling for the contributions of all banks is 1.6 percent of protected deposits, subject to a minimum of CHF 6 billion. According to esisuisse, the 1.6 percent currently amounts to CHF 7.9 billion (as of October 2026). Pillar 3a and vested benefits balances are not covered by esisuisse. They enjoy separate preference up to CHF 100,000 (Art. 37a para. 5 BankG), but are paid out to the foundation only during or at the end of the bankruptcy proceedings.

Duration of the payout to clients

The person appointed by FINMA pays the money out to clients once they have reported their payment details. As of October 2026, esisuisse expects it to take several weeks for the money to reach the client. From 2028, according to esisuisse, the target is a payout to clients within seven working days of receiving these details.

What happens to securities in custody

Securities the bank holds in custody for the client are segregated (Art. 37d BankG) and handed over to the client. Unlike deposits, they are not subject to an upper limit. If the client owes the bank money, the bank can have recourse to them under a contractual pledge. If securities held in collective custody are missing, the liquidator first covers the shortfall with securities of the same kind that the bank holds for its own account. The affected clients bear any remainder pro rata and receive a claim for compensation against the bank in return (Art. 19 FISA).

Pension assets and the bank's own securities

Pillar 3a and vested benefits assets invested in securities belong to the pension foundation or vested benefits foundation and are handed over to it. For securities the bank has issued itself, such as its own bonds or structured products, segregation is of little help: the client gets the securities back but remains a creditor of the bank for their value, and may be paid only in part or not at all in the bankruptcy. By contrast, the law counts medium-term notes (Kassenobligationen) deposited with the bank in the client's name as deposits, within the same joint limit of CHF 100,000 per client and bank (Art. 37a para. 1 BankG).

Frequently asked questions about Stock Markets & Market Events

01 What happens to my custody account if my bank fails?

The bank merely holds shares, bonds, funds and other securities in custody. They are not part of the bank's assets. Under the Banking Act (BankG), they are segregated in bankruptcy and handed over to the client (Art. 37d BankG). If the client owes the bank money, for example under a loan, the bank can have recourse to the securities under a contractual pledge. If securities held in collective custody are missing, the shortfall is covered first from securities of the same kind that the bank holds for its own account. The affected clients bear any remainder pro rata under the Federal Intermediated Securities Act (FISA) and receive a claim for compensation against the bank in return (Art. 19 FISA). If the bank has issued the securities itself, such as its own bonds or structured products, the client gets them back but remains a creditor of the bank for their value. Deposit insurance does not cover securities.

02 How much of a bank balance is protected if a bank fails?

Under the Banking Act (BankG), deposits in the client's name are preferential up to CHF 100,000 per client and bank, so they are paid ahead of ordinary claims (Art. 37a para. 1 BankG). All accounts at the same bank are added together for this purpose. Medium-term notes (Kassenobligationen) deposited with the bank in the client's name are counted towards the same limit. If the deposits are booked with a branch in Switzerland, the esisuisse deposit insurance scheme secures the payout. The funds of esisuisse are, however, limited by law. For Pillar 3a and vested benefits assets that a pension foundation or vested benefits foundation holds in an account at the bank, a separate maximum of CHF 100,000 per person applies (Art. 37a para. 5 BankG). These pension assets are preferential, but not covered by deposit insurance. They are paid out only during or at the end of the bankruptcy proceedings, to the foundation.

03 When does the SNB decide on the policy rate?

The Governing Board of the Swiss National Bank (SNB) decides quarterly at its monetary policy assessment, and in between if necessary. It announces the decision in a press release and explains it at a news conference.

04 What does the SMI measure?

The Swiss Market Index (SMI) measures the development of Swiss blue chips, that is, the 20 largest and most liquid equities traded on SIX. It is weighted by the market value of the freely tradable shares, the free float market capitalisation. On the quarterly adjustment dates the weight of a single component is limited to 18 percent. SIX reviews the composition once a year at its ordinary review, in September. The components are selected from the broader Swiss Performance Index (SPI), which serves as a benchmark for the entire Swiss equity market.

05 Can a stock market crash be predicted?

No. The start, duration and low point of a price slump cannot be predicted reliably; they usually become clear only in hindsight. A crash is a sharp fall in prices within a short time. The term bear market is used when an index stands 20 percent or more below its most recent high. A bear market can extend over months or years.