Swiss Banking: Reserve Fund and Regulation
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The overall purpose of my Richter project is to explore the relationship between Switzerland?s banking regulation, focusing on the roles of the Swiss Federal Banking Commission, the government financial regulator, and the Swiss Banking Association, the banks? self-regulatory organization. Specifically, I aimed to uncover how the Swiss banking system maintains its depositor confidence despite lacking any formal government insurance, such as the United States? FDIC $100,000 insurance, which has become common practice in many banking systems. I set out hypothesizing that the existence of mandatory reserve funds held by banks in case of financial difficulties supplemented the governmental insurance in boosting consumers? confidence in the institutions. To accomplish my research I held interviews with a variety of Swiss economists, attorneys, bankers and regulators in the major Banking cities in Switzerland -Geneva, Bern, Basel, and Zurich. Through the interviews and the literature, I came to the conclusion that Switzerland?s banking system has found alternative ways to that of the United States in ensuring the safety and soundness of the banking system, but mandatory reserve funds have a tangential role. Instead, high capital standards, a different approach to regulation and dealing with conflicts of interest, private depositor protection, and an expert/historic finance environment, as well as several other factors, bring stability to the Swiss banking system.