I still remember the look on a client’s face when I explained that half his €800,000 deposit at a major European bank wasn’t actually safe. “But it’s a bank,” he said. “Banks don’t just take your money.”
That’s the thing – they do. Not through theft, not through fraud, but through perfectly legal mechanisms called bail-ins. These mechanisms exist in every major banking jurisdiction you probably use: Switzerland, Singapore, the EU, the United States. Most private bankers won’t explain them until it’s too late.
I’ve watched regulators draft these rules, sat in meetings where FINMA discussed resolution strategies, and advised clients who lived through the Cyprus crisis. The world changed after 2008. Deposits stopped being sacred. Instead, they became just another liability on a bank’s balance sheet – and in a crisis, you’re last in line for protection.
Let me show you exactly how this works, what you’re actually risking, and how to structure your banking so you stay on the right side of the line when the next crisis hits.
What Bail-In Actually Means (And Why “Too Big to Fail” Is Over)
Most people still think in terms of bail-outs – governments rushing in with taxpayer money to save failing banks. That playbook is dead. Every major jurisdiction now has legal bail-in powers that force losses onto shareholders and creditors first.
Here’s how it works in practice: when a bank hits the wall, regulators don’t ask if they should save it. They ask who pays. The answer is baked into law – a strict hierarchy of who gets wiped out first.
The Legal Foundation
In the EU, the Bank Recovery and Resolution Directive (BRRD) and Single Resolution Mechanism (SRM) give the Single Resolution Board power to write down your deposits. Switzerland’s TBTF amendments let FINMA bail-in debt and potentially uninsured deposits. Singapore’s MAS Act received amendments in 2016 to include bail-in powers. The US Dodd-Frank Act created the Orderly Liquidation Authority, explicitly prohibiting taxpayer bail-outs.
These aren’t obscure rules. They’re active, tested frameworks. The SRB publishes resolution plans for every major EU bank. FINMA runs annual simulation exercises. MAS consults on enhancements. This machinery is ready – you just don’t see it until it’s activated.
The Resolution Hierarchy: Who Gets Hit First
Think of a bank failure like a sinking ship. There’s a specific order for who gets thrown overboard, and contrary to popular belief, depositors aren’t wearing life jackets – they’re just not first in line.
The Pain Chain
First to drown: Common equity shareholders. Regulators wipe them out immediately. No surprises there.
Next: Additional Tier 1 (AT1) instruments, usually called CoCos (contingent convertibles). These automatically convert to equity or get written down when capital ratios fall below 5.125% or 7%. In 2023, Credit Suisse’s AT1s became worth zero overnight. Poof. $17 billion gone.
Then: Tier 2 bonds. Regulators write these down in resolution.
Then: Senior unsecured debt – including bail-in bonds specifically issued to be sacrificed.
Finally, the grey zone: Uninsured deposits. Here’s where it gets personal. In the EU and Switzerland, uninsured deposits rank pari passu with senior unsecured debt. This means they get bailed-in only after all that debt is exhausted – but if the hole is deep enough, they will be hit.
Last, and usually safe: Insured deposits – up to €100K in Europe, CHF 100K in Switzerland, $250K in the United States, SGD 75K in Singapore.
But insured deposits have limits, and those limits are lower than you think.
The Insurance Mirage: Why €100K Isn’t Enough
Let’s be blunt: deposit insurance is designed for retail savers, not wealth holders. If you’ve got €500K, €2M, or €20M in cash, you’re playing a different game – one where the rules weren’t written with you in mind.
Real Insurance Coverage
Switzerland: Esisuisse covers CHF 100K per bank per depositor. The fund is pre-funded by banks, not the government. If multiple major Swiss banks failed simultaneously, the fund would run out quickly.
European Union: €100K per bank per depositor. The SRB has a Single Resolution Fund, but it’s for resolution costs, not deposit insurance payouts. National deposit guarantee schemes vary in funding levels – some have thin capital.
United States: $250K per depositor per bank per ownership category. This is more generous, but the FDIC’s Deposit Insurance Fund has limits. In a systemic crisis, they can borrow from Treasury, but that’s a political decision, not a guarantee.
Singapore: SGD 75K per bank per depositor. The SDIC is credible, but coverage is relatively low for high-net-worth individuals.
UAE: AED 100K per bank, but the scheme is bank-funded, not government guaranteed. No explicit sovereign backing exists.
Bottom line: if you’re holding more than these amounts in a single bank, you’re uninsured. And uninsured deposits are legally bail-in-able.
Real Scenarios: What Actually Happens to Your Money
Let’s walk through concrete examples. I’ve anonymized these, but they’re based on real client situations and actual resolution events.
Scenario 1: The European Entrepreneur
Pierre runs a SaaS business from Portugal. He keeps €1.8M in a single large EU bank – his operating float, tax reserves, and personal savings combined. The bank hits trouble after a commercial real estate meltdown.
The SRB declares it Failing or Likely to Fail. The resolution scheme writes down AT1s, Tier 2, then senior debt. The hole is still €500M deep. They bail-in uninsured deposits at a 30% haircut.
Pierre loses €540,000. He receives shares in a bridge bank that will later wind down – essentially worthless. His business collapses because he can’t make payroll.
How to prevent this: Split into three banks, none holding more than €100K in operational accounts. Move tax reserves to short-term German sovereign bonds. Keep personal savings in a Swiss private bank relationship with allocated gold custody.
Scenario 2: The Swiss Resident
Anna lives in Zurich. She has CHF 2.5M at UBS, thinking “it’s Switzerland, it’s safe.” After the Credit Suisse merger, UBS’s balance sheet is 500% of Swiss GDP. A derivatives crisis hits.
FINMA activates SPE resolution. The holding company gets bailed-in, AT1s and senior debt are wiped. Deposits transfer to a bridge bank. Because UBS is systemically vital, uninsured deposits are spared this time – but no legal guarantee exists for next time.
How to prevent this: Keep CHF 100K at UBS for daily banking. Move the rest to a Swiss private bank relationship that offers direct sovereign bond access and allocated gold storage. Split personal and company money across different legal entities.
Scenario 3: The US Digital Nomad
Sarah, a US citizen, keeps $800K in a small US bank that failed in 2024. The FDIC uses Purchase & Assumption – all deposits transfer to a larger bank intact. She’s fine.
She assumes this is normal. It’s not. The FDIC only did this because the failure was small and politically manageable. In a systemic crisis with multiple large banks, they’d use bail-in. Uninsured deposits would face risk.
How to prevent this: Stay within FDIC limits per bank. Use revocable trusts to multiply coverage ($250K per beneficiary). Keep excess in Treasury bills directly, not bank deposits.
Scenario 4: The Smart Structurer
David keeps €3M across five banks in three jurisdictions: €100K in two EU banks, CHF 100K in two Swiss private banks, $250K in a US bank, and the rest in a diversified portfolio of short-term sovereign bonds and allocated gold.
A crisis hits. One EU bank fails. He loses nothing – his €100K is insured and pays out within three weeks. His other accounts are untouched. His bond portfolio actually appreciates as rates fall. He continues operating normally.
This is the model. It’s not complicated, but it requires planning before the crisis.
Tactical Structuring: How to Build a Bail-In-Proof Banking Setup
Here’s where we get practical. Most of my clients are non-residents – they can’t just walk into a Sparkasse or open a ZKB account. Traditional “safe” local banks aren’t accessible. So we need a different strategy.
Principle 1: Stay Below Insurance Limits (Your Non-Negotiable Baseline)
Map out every jurisdiction where you bank. Identify the exact insurance limit. Never exceed it in any single bank, for any single legal entity.
Action step: Create a simple spreadsheet. List every account, balance, bank, jurisdiction, insurance limit. Highlight anything over the limit in red. That’s your at-risk capital.
Principle 2: For Non-Residents, Replace “Local Safe Banks” with Direct Sovereign Exposure
Since you probably can’t access cantonal banks or Sparkassen, here’s what actually works:
German Bunds (Schatz, Bobl, Bund): If you’re holding euros, you can buy German government bonds through any private bank that offers non-resident accounts. These are AAA-rated, default-risk-free, and pay more than bank deposits. You can buy short-term notes (1-3 years) that mature when you need liquidity.
US Treasury Bills: If you have a US tax number, you can open a TreasuryDirect account. Otherwise, buy through any private bank with US market access. T-bills are the global safe haven – literally the definition of risk-free.
Swiss Confederation Bonds: Available through Swiss private banks. CHF-denominated, ultra-safe, and specifically designed for conservative investors.
Why this beats deposits: Sovereign bonds aren’t part of a bank’s balance sheet. If your bank fails, your bonds are your assets in custody, not the bank’s liabilities. They don’t get bailed-in.
Principle 3: Add Supranational Bonds for Geographic Diversification
These are issued by international institutions with quasi-state guarantees:
World Bank Bonds: Issued in multiple currencies (USD, EUR, CHF). Backed by member states, including the US, Germany, Japan. You can buy them through any private bank that offers international bond access.
European Bank for Reconstruction and Development (EBRD) Bonds: AAA-rated, issued in EUR and other currencies. Backed by EU member states and the US.
International Monetary Fund (IMF) Notes: Sometimes available through private banking channels.
European Investment Bank (EIB) Bonds: AAA-rated, EU-backed, issued in multiple currencies.
These give you AAA exposure without concentrating in one national government. For non-residents with private banking relationships, they’re accessible instruments that keep your wealth outside the deposit insurance system.
Principle 4: Physical Gold as Non-Bankable Wealth
Bank accounts are bookkeeping entries – they’re part of the financial system’s liability structure. Physical gold isn’t.
How to hold it: Buy allocated gold bars or coins through a Swiss private bank or precious metals dealer. Store in a Swiss VAT-exempt warehouse. You get a custody certificate, but the gold is your property, not a bank’s liability.
Legal status in resolution: If your bank fails, your gold isn’t part of the bank’s bankruptcy estate. It’s not a deposit, not a security, not bail-in-able. It’s outside the system.
How much: For clients with €2M+, I typically suggest 5-10% in physical gold stored in Switzerland. It’s not for speculation – it’s for systemic insurance.
Comparison: Where Should Your Money Actually Live?
| Asset Location | Bail-In Risk | Principal Safety | Liquidity Crisis | Access for Non-Residents | Recommended For |
|---|---|---|---|---|---|
| Uninsured Bank Deposits | High – Can be haircut | Low – Bank credit risk | Immediate freeze | Easy – Any bank | Operational float only (<€100K) |
| Insured Bank Deposits | None – Explicitly excluded | High – Government guarantee | 2-4 week payout delay | Easy – Any bank | Emergency reserve (within limit) |
| AAA Sovereign Bonds (Direct) | Zero – Not a bank liability | Maximum – Full state guarantee | Normal market liquidity | Via private banking | Core wealth (50-70% of liquid assets) |
| Supranational Bonds (World Bank, EBRD) | Zero – Quasi-state backing | Maximum – Multi-state guarantee | Normal market liquidity | Via private banking | Geographic diversification (10-20%) |
| Physical Gold (Allocated) | Zero – Outside financial system | Maximum – Tangible asset | 2-5 day sale/transfer | Via banks/dealers | Systemic insurance (5-10%) |
Private banking access typically requires €500K-€1M minimum relationship size, but this varies by bank and jurisdiction.
Principle 5: For Remaining Deposits, Use Multiple Banks in Multiple Jurisdictions
After you’ve moved excess cash into sovereign bonds and gold, you still need operational deposits. Here’s how to structure them:
For EUR liquidity: Use two banks in different EU countries (e.g., one in Germany, one in Netherlands). Never exceed €100K per bank.
For USD liquidity: Use one US bank for daily operations, stay under $250K. For larger amounts, use a second US bank or a US branch of a Swiss private bank.
For CHF liquidity: Swiss private banks are accessible to non-residents, but minimums are high. If you qualify, use two different banks. Stay under CHF 100K each.
For GBP or other currencies: Similar logic – split across two jurisdictions, respect insurance limits.
Principle 6: Use Legal Entities for Multiplication
Each legal entity gets separate insurance coverage if structured correctly.
Example: Personal account €100K, operating company €100K in a different EU country, holding company €100K in Switzerland, family foundation €100K in Singapore.
Critical: Entities must have genuine economic substance – real business purpose, separate tax filings, actual governance. Resolution authorities can collapse sham structures.
The Pre-Resolution Checklist (Do This Today)
Don’t wait for the next crisis. Here’s what I make every non-resident client do within 30 days:
- Audit your current exposure. That spreadsheet I mentioned? Fill it out. Know exactly where you stand. Include every bank account, fintech balance, and banking cash sweep account.
- Open a private banking relationship for sovereign bonds. Any major Swiss, Singapore, or Liechtenstein bank offering non-resident services can facilitate this. Buy your first German Bund or US Treasury bill this month. Get comfortable with the process.
- Contact a Swiss private bank or precious metals dealer for gold custody. Get quotes for allocated gold storage. Even if you start with a small amount, establish the relationship.
- Pre-open a second bank account in a different jurisdiction. Takes weeks for non-residents. Do it now. If you’re EU-based, open a Swiss private banking relationship. If you’re outside EU, open a German or Dutch bank account.
- Document your source of funds. When accounts get frozen for AML review post-resolution, clean documentation speeds release. Prepare tax returns, sale agreements, inheritance docs now.
- Set up at least one legal entity if needed. A holding company in a reputable jurisdiction (Switzerland, Singapore, UAE) costs a few thousand francs. It’s cheap insurance for separate deposit coverage and asset protection.
- Stress-test your liquidity. Ask: if all my uninsured deposits were frozen for three months, can I operate? Keep 6–12 months expenses in insured accounts, sovereign bonds, or T-bills.
The Bottom Line
The old rule was “pick a safe bank and trust it.” The new rule is trust no single bank, jurisdiction, or insurance scheme. Treat deposit safety as a portfolio problem.
For non-residents, this means getting creative. You can’t rely on local savings banks or cantonal banks. Instead, build a three-layer defense:
- Layer 1: Operational deposits, fully insured, spread across 2-3 banks in different jurisdictions
- Layer 2: Core wealth in AAA sovereign bonds and supranational bonds (World Bank, EBRD, IMF) – default-risk-free, outside the banking system
- Layer 3: Systemic insurance in physical gold stored in Switzerland – outside the financial system entirely
Most people won’t do this. They’ll keep €2M in Revolut, Wise, and one “premium” bank account. They’ll hope. Hope is not a strategy.
The next crisis won’t ask if you’re ready. It’ll just happen. Your job is to structure today so you’re not a creditor begging for mercy when the bail-in comes.
Major Sources for Reference
- Single Resolution Board (SRB) – Bail-in Toolkit
Official methodology for EU bank resolution, including creditor hierarchy and bail-in application rules.
https://srb.europa.eu - Swiss Financial Market Supervisory Authority (FINMA) – Resolution Reports
Annual reports on resolution planning for Swiss banks, including TBTF framework and creditor ranking.
https://www.finma.ch/en/enforcement/recovery-und-resolution-n/ - Monetary Authority of Singapore – Resolution Regime Consultation Papers
Documentation of MAS bail-in powers and application framework for Singapore-incorporated banks.
https://www.mas.gov.sg - Federal Deposit Insurance Corporation (FDIC) – Resolution Readiness Reports
Analysis of US bank resolution frameworks under Dodd-Frank and FDICIA, including orderly liquidation authority.
https://www.fdic.gov/news/speeches/ - Bank for International Settlements – Basel Framework on Resolution
International standards for bail-in regimes and creditor hierarchy, underpinning national regulations.
https://www.bis.org/bcbs/publ/d424.pdf
