VIAC and WIRBank

Hi,
I wanted to know your opinions on this article on Blick( https://www.blick.ch/news/wirtschaft/krisenwaehrung-wir-in-der-krise-dem-bueezer-geld-droht-der-kollaps-id15564266.html ) and what does it mean for people who are invested with VIAC?

Blick is not really a good source for any information really. It’s a sensationlist “Boulevard” news paper without much substance.

Anyway the issues with the WIR have been known for quite some time now, I rember my old CEO complaining about the exact issues in this newspost 5 years ago.

In regards to VIAC I don’t think it would have much effect on them if the WIR collapses. Check out WIR banks balance sheet for 2018: https://gb.wir.ch/de/2018/wichtigste-zahlen-2018 the amount of CHFWir is shrinking slowly and does not represent a significant amount. They also have enough Eigenkapital CHF to replace all of the outstanding CHFWir. Maybe someone wiht more experience reading balance sheets can chime in here.

I like to look at the Terzo Vorsorgestiftung as seperate entity which functions independently, however I cannot see this anywhere. With most of our assets hopefully invested in stocks at VIAC, they are in our name and can be transferred (in theory) to another entity should WIR > Terzo > VIAC fail. I’d like to think the 3 entities listed all have failsafes in place

VIACs partner is Terzo Vorsorgestiftung der WIR Bank, not WIR Bank Genossenschaft itself. Technically, it should be of no concern if WIR Bank goes bust. Reality is though, that Vorsorgestiftungen are often heavily entangled with the underlying company, e.g. WIR Bank might manage their operations and there might be substantial financial ties (legally allowed up to 10% of Terzo’s assets). Unfortunately, it seems Terzo is not publishing their financial reports. It would certainly be a mess if WIR Bank goes bankrupt, and yes, let’s assume Terzo goes bankrupt too (or more realistic, has to liquidate a substantial share of their assets short-term which will require restrictions).

Technically what happens is:

  • Your cash is not secured, but privileged in debtor rank 2. So you might get something out of a bankruptcy proceedings, but it would take for ever and I would not count on that.
  • Your assets however are yours, but you likely lose temporary access to them. They are with Credit Suisse anyway and not with Terzo itself, under your name and transferrable.

In short: Keep your money invested and your fine. If you keep cash… well, let’s say I would not keep my cash with Terzo myself

Here is what VIAC is saying on this by the way: VIAC FAQ

Also pinging @VIAC, maybe they want to add something on this

PS as mentioned by @Joey: WIR money in circulation seems to be some 700 Million, which only accounts for around 13% of WIR Bank’s total assets. In other words, WIR as a currency might go bust, but even WIR Bank itself might survive that. However, note that VIAC might be a separate entity, but they are only your/our asset manager. Your concern is indeed Terzo failing, not VIAC.

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For me, the fact that WIR bank does/supports things like VIAC, Savings Accounts with the best interest rates a couple of years back and so forth is good news. They do not rely on the business model from back in 1934 as many other banks do.

On the other hand, WIR bank does not change CHFWir back to CHF. So even if the system were to collapse and CHFWir would be worthless, I see 115M of CHFWir debits and 677M credits in their balance sheet. I would actually love to have this position in my own currency.

It goes without saying that banks which offer high interest rates are generally traying to attract new capital. This typically hints at poor performance i.e. higher risk. In the case of WIR bank, as a merchant bank which caters directly to SMEs, its performance is strongly linked to the performance of Swiss SMEs. That is particularly true for the WIR franc, which is a community currency used by participating Swiss SMEs. Both are likely to fluctuate along with the SME sector, but demand for WIR francs is also impacted by globalization. As for WIR’s readiness to deviate from the 1934 banking standard (by renouncing bank customer privacy, for example): it opens new avenues for shorter-term/higher-yield investments, but also hints at desperation to bring in new capital, in my opinion. I use VIAC for part of my 3a portfolio and I see WIR Bank as a good avenue for investing in Swiss SME. I wouldn’t personally invest my full 3a allowance through one company, but that’s just me.

Hello,
Here is the latest interview from the CEO of WIR with mention of the VIAC compagny owned 40% by WIR bank. Article is more optimistic. It seems the blick article has particpated in the drop of WIR bank shares

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Hi everybody (and Daniel),

I’ve been thinking about this for some time. My perspective was that a highly performing bank should be able to offer a better rate for assets that give them some predictability (like term deposits - or bonus for periods without withdrawals, which is what the WIR bank is doing) because they are able to get better returns out of it, while a bank with poorer results couldn’t perform well enough to keep on with it.

I get that, in order to be profitable with money lended to them, they have to first beat the negative interest rates on the upgraded reserves they’re bound to have, then make good returns on the part of the money they can use for it AND take your credit-worthiness risk upon themselves, so I can understand why it’s not a solution offered to most retail investors but the WIR way to do it looked to me like they have good options for investing the money (typically Swiss SMEs) and could offer better returns because they actually knew what to do with your money (while most banks leave me under the impression that they wouldn’t know what to do with additional money except park it in the SNB, which strikes me as a strategy for poor performers).

So, I was under the impression that the WIR bank had a better banking model and/or was under better management than most other banks. Am I seriously delusional in this?

The extra interest is 300 per year at most, and to get it you need to invest almost 10k into the bank (and not remove any money, plus add at least 5k per year in the account, so once you reach 50k, it probably doesn’t make to add more, but then you don’t get the 0.2% extra).

The bank could probably see that as cost of marketing :slight_smile:

You can just withdraw money the year you reach 50k (or more If it is mathematically better) and then from the next year you add 5k again.

With 50k at 0.7% it gets you 350.-
With the additional dividends paid for the 25 shares (stable 10.25 since some years), it get’s you 256.- (they are free of tax). Not counting for the +/- of the share on the OTX stock exchange, that’s roughly 1% remuneration.
Very happy with that… sad to see the interest rates go down gradually though

Thanks for your replies.

@nabalzbhf : I agree that the numbers don’t make it a compelling option over others (rates are low however you look at it), what I’m trying to understand is if the WIRbank model (including its structure, WIR money and the whole package) is actually a better model than a traditional banking one.

An underlying question I would have is: do you think WIRbank/Terzo will still be there in 30 years for us to collect the benefits from our VIAC investments and/or get back the money invested in their [WIR] shares to get the better yields or is that bet not worth the potential profits and you think, like @Daniel seemed to, that WIRbank is under poor management and/or is suffering more than others from a difficult environment making this bet a risky one on the long term?

Edit: adding a more specific formulation.

I’m not super familiar, but with such low interest rate, there are less benefits for people to participate in the WIR system (from what I can read lack of liquidity and interest rates were the primary motivations when it was created). Personally it sounds like an interesting experiment, I don’t know if it a better (safer) model though, but since they are regulated as a bank the risk for account holders would be low (the risk for WCH holders is different, I’m not sure there’s much preventing it to be debased).

That’s not how I read this page: jhttps://www.esisuisse.ch/fr/reponses-a-vos-questions?set_language=fr

From my understanding, assets (stocks, etc) are held in your name in a bank. So if VIAC is brankrupt, you go to Credit Suisse and tranfer your assets to somewhere else: you haven’t lost anything.

But for the cash deposits, the link says that they are guaranteed up to 100k. So if the bank goes bust and loses all the clients’ deposits, you have th first 100k insured and you’ll get them back. What bites is if you have more than 100k. Anything above 100k you’ll have to get in line for along with every other creditor and at that point, good luck to you. You’d still be in class 2 out of 3, but meh.

Am I misunderstanding esisuisse’s explanations?

Then I suggest you read it again, you are at exactly the right spot after all.
Hint: Preferential deposits vs protected deposits

You retain legal ownership of securities legally owned by you and held by a custodian bank on your behalf if the custodian bank goes bankrupt. The same applies to valuables placed in a bank’s vault for safekeeping. A custody account is not the same thing as a bank account (an IOU from a bank), for which depositor protection applies.

However, in actual practice custody has become a grey area because many securities are held in street name. That means the legal owner is a CSD, broker or some other financial intermediary, while you benefit from usufructory rights. This is the case with securities held in a “Sammeldepot” and so far I have not been able to get a 100% satisfactory answer from any Swiss broker about the legal rights attached to these securities in the event of bankruptcy.

I have to take a closer look at Viac, but my initial hunch based on Viac’s low costs would be that securities are held in street name. Can anyone here enlighten me?

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This is a really interesting fact to know, my understanding is that the custody account is always at your own name.

Personally I’m a bit concerned about the 6 Bilion cap of ESISuisse, if a bank with 60K Customers, everyone with 100K CHF in assets, goes bankrupt, we already hit that cap. And then what for more customers?
Maybe Switzerland is more secure since most people are at postfinance, backed by the confederation, or at cantonal banks. Raiffeisen is surely a risk in this case but should be watched closely by FINMA.

PostFinance is no longer guaranteed by the federal government. Since becoming a bank a few years back it is backed by the Esisuisse depositor scheme like other Swiss banks. The cantonal banks (with the exception of BCGE, BEKB and BCV) are guaranteed by cantonal governments.

Just note that the Esisuisse insurance scheme only covers bank account balances and medium-term notes. It does not apply to securities (see my post above) nor to assets held by retirement foundations (pillar 3a, vested benefits). Retirement cash balances like those held by Viac are preferential (priority claim) but not protected (insured by Esisuisse). See this article for more information:
https://www.moneyland.ch/en/bank-failure-swiss-money-protection

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Thanks @Daniel, your link is well explained.
In fact they clearly state my fear that 6 billion may not be enough.
Even if is a rare event, one big bank went bankrupt in 2008…

Tier 2: Protected deposits
If the bankrupt bank does not have enough liquid assets to cover all of its customers’ preferential deposits, the Esisuisse steps in. This scheme insures up to 100,000 francs of account balances per customer and bank. …
The depositor protection is limited to a maximum sum insured of 6 billion francs for all banks and bank customers. This maximum sum insured is sufficient to cover individual bankruptcies of smaller banks. However, if a large bank or multiple smaller banks were to go bankrupt, the 6 billion francs would not adequately cover all protected deposits.

will probably never happen here. UBS went almost bankrupt and to solve the problem, it has “bought” SBS. Some people will intervene.

As long as someone doesn’t want it to fail, I wouldn’t be worried. Also remember that almost everyone has an account at PF. I mean companies…

Hi ma0, I recommend you look into what happened to the cantonal bank of Solothurn. Bank bankruptcies are rare in Switzerland, but they do happen. Still, this has little bearing on pillar 3a cash assets because they are not insured by the Esisuisse scheme.

What would be interesting to look into is how the legal ownership of securities held by Swiss retirement foundations is structured.

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