The birth of modern Geneva private banking (1815-1945) — a part of the book Geneva as an International Financial Centre by Dr Alexander Ressos.
Between Geneva’s entry into the Confederation and the end of the Second World War, the Geneva financial centre took the shape it would retain, in essence, until the end of the twentieth century. The great private banking houses founded at the end of the eighteenth and the beginning of the nineteenth century grew and specialised in wealth management. Joint-stock banks appeared, carried by the radicalism of James Fazy and by the rise of the railways. A stock exchange was created. Switzerland gave itself a single currency and then a central bank. After the crises of the interwar years, the Federal Banking Act of 1934 instituted banking supervision and placed banking secrecy under the protection of the criminal law. The Second World War, finally, confronted the financial centre with choices that, half a century later, would be the subject of a painful reckoning.
Part D retraces this evolution in five chapters. The first covers the period of the Restoration and the founding or development of the houses that still dominate Geneva private banking. The second describes the transformations of the second half of the nineteenth century: radicalism, joint-stock banks, the stock exchange, the railways and monetary unification. The third analyses the particular status of private bankers, as partners with unlimited liability, and the culture attached to it. The fourth retraces the crises of the interwar years and the genesis of the Banking Act of 1934, including its Article 47. The fifth addresses the Second World War, dormant assets and the work of the Independent Commission of Experts chaired by Jean-François Bergier.
This part draws on sources that are more numerous and more accessible than those of the preceding parts. The founding dates of the principal houses and the chronology of the 1934 Act have been verified; other information remains to be confirmed, and the notes say so. The guiding thread remains that of the book as a whole: the way in which a financial centre built on trust constructs itself, protects itself and transforms itself in the face of crises and external pressures.
This part belongs to Geneva as an International Financial Centre by Dr Alexander Ressos, published here in full, section by section.
From the Restoration to the radical revolution (1814-1848): the rebirth of Geneva banking — overview and summary
When Geneva joined the Confederation in 1815, its economic situation was difficult. Read more Geneva · The birth of modern Geneva private bankingGeneva in 1815: a city to be rebuilt
The canton of Geneva that came into being in 1815 differed markedly from the old Republic. Read more Geneva · The birth of modern Geneva private bankingThe founding houses
Several of today’s great Genevan private banking houses were founded in the period surrounding the French annexation and the Restoration. Read more Geneva · The birth of modern Geneva private bankingThe business: commission, management and international investments
The Genevan houses of the first half of the nineteenth century carried on lines of business inherited from the previous century. Read more Geneva · The birth of modern Geneva private bankingTrust between families: alliances and networks
Genevan banking under the Restoration remained a family affair. The partners of the banking houses belonged to a narrow circle of families from the old patriciate and the prosperous bourgeoisie,… Read more Geneva · The birth of modern Geneva private bankingThe Caisse d’épargne and the spread of savings
The Restoration saw the birth in Geneva of an institution intended for a clientele quite different from that of the private bankers: the savings bank. Read more Geneva · The birth of modern Geneva private bankingGeneva as a capital market under the Restoration
In the decades following 1815, Geneva regained its role as a market for capital. The Genevan families rebuilt their fortunes through trade, watchmaking, investments and inheritances. Read more Geneva · The birth of modern Geneva private bankingThe revolutions of 1841 and 1846
From the 1830s onwards, the conservative regime of the Restoration met with growing opposition. Read more Geneva · The birth of modern Geneva private bankingJames Fazy and the critique of the “financial aristocracy”
James Fazy developed a virulent critique of what he called the Genevan financial aristocracy. Read more Geneva · The birth of modern Geneva private bankingWhat 1848 changed for banking
The Federal Constitution of 1848 transformed the economic framework within which Genevan bankers operated. Read more Geneva · The birth of modern Geneva private bankingGenevan science and the spirit of measurement
The Geneva of the late eighteenth and early nineteenth centuries ranked among the most active scientific centres in Europe. Read more Geneva · The birth of modern Geneva private bankingForeigners in Geneva under the Restoration
The Restoration made Geneva and its surroundings a favoured destination for foreign travellers. The English, in particular, discovered Lake Geneva and the Alps in the wake of Romanticism. Read more Geneva · The birth of modern Geneva private bankingThe economic education of the elites
Future Genevan bankers received an education that combined general instruction with practical apprenticeship. Read more Geneva · The birth of modern Geneva private bankingA banking house around 1830: an attempt at reconstruction
The archives of the Geneva banking houses make it possible to picture, in broad outline, how such a house operated around 1830. Read more Geneva · The birth of modern Geneva private bankingGeneva and the credit of Restoration France
After 1815, France had to pay the allied powers a considerable war indemnity and to maintain occupying troops. Read more Geneva · The birth of modern Geneva private bankingGeneva capital and industrialisation
The first half of the nineteenth century saw the rise of industrialisation in Switzerland. Read more Geneva · The birth of modern Geneva private bankingWomen and the management of family wealth
Nineteenth-century Geneva wealth management served a clientele that included women, even though their legal capacity remained limited. Read more Geneva · The birth of modern Geneva private bankingChecklist: assessing the soundness of a family bank
Examine the ownership structure and the rules for transfer between generations, in particular the conditions for admitting new partners. Read more Geneva · The birth of modern Geneva private bankingRadicalism, railways and joint-stock banks (1846-1914) — overview and summary
The second half of the nineteenth century profoundly transformed the Geneva financial centre. Read more Geneva · The birth of modern Geneva private bankingJames Fazy’s programme: credit, city and openness
Having come to power in 1846, James Fazy implemented a programme of modernisation aimed at making Geneva an open, prosperous and modern city. The first undertaking was urban. Read more Geneva · The birth of modern Geneva private bankingJoint-stock banks and competition with the private bankers
The middle of the nineteenth century saw the appearance in Europe of a new type of institution: the joint-stock bank, which pools the capital of many shareholders and can mobilise resources far… Read more Geneva · The birth of modern Geneva private bankingThe Geneva Stock Exchange
In the middle of the nineteenth century, securities transactions grew in Geneva, driven by the rise of joint-stock companies and public loans. Read more Geneva · The birth of modern Geneva private bankingThe railways: capital, speculation and politics
The rise of the railways was the great economic event of the mid-nineteenth century. Read more Geneva · The birth of modern Geneva private bankingGeneva and international high finance
In the second half of the nineteenth century, Geneva’s bankers took part in the great operations of international finance. Read more Geneva · The birth of modern Geneva private bankingThe monetary question: from the Swiss franc to the National Bank
The Constitution of 1848 gave the Confederation the right to coin money. The Federal Coinage Act of 1850 introduced the Swiss franc, modelled on the French franc, which facilitated exchanges with… Read more Geneva · The birth of modern Geneva private bankingThe Belle Époque of wealth management
In the late nineteenth and early twentieth centuries, Geneva became a favoured place of sojourn and residence for the European elites. Read more Geneva · The birth of modern Geneva private bankingThe crises of the late nineteenth century and the winnowing of the houses
The second half of the nineteenth century was punctuated by financial crises that affected the Geneva financial centre. Read more Geneva · The birth of modern Geneva private bankingGeneva on the eve of the Great War
On the eve of the First World War, the Geneva financial centre presented a contrasting picture. Read more Geneva · The birth of modern Geneva private bankingThe new town and property finance
The demolition of the fortifications, from the middle of the nineteenth century onwards, freed up considerable land around the old town. Read more Geneva · The birth of modern Geneva private bankingThe telegraph, information and the speed of the markets
The introduction of the electric telegraph in the middle of the nineteenth century transformed finance. In Switzerland a telegraph network was set up from the early 1850s. Read more Geneva · The birth of modern Geneva private bankingGeneva, the Red Cross and the Alabama arbitration
The second half of the nineteenth century saw Geneva affirm an international vocation that would have a lasting influence on the image of its financial centre. Read more Geneva · The birth of modern Geneva private bankingTourism, hotels and financial services
The second half of the nineteenth century made Geneva a stopping point on the international tourist circuit. Read more Geneva · The birth of modern Geneva private bankingThe beginnings of organised philanthropy
The Geneva tradition of mutual aid, born in the time of the Reformation, was transformed in the nineteenth century into organised philanthropy. Read more Geneva · The birth of modern Geneva private bankingThe financial press and investor information
The rise of joint-stock companies and of the stock exchange was accompanied by the development of the financial press. Read more Geneva · The birth of modern Geneva private bankingChecklist: assessing the governance of a growing bank
Verify that the growth strategy rests on a realistic analysis of the risks and of the resources available. Read more Geneva · The birth of modern Geneva private bankingPrivate bankers: a status, a liability, a culture — overview and summary
The expression “private banker” has a precise meaning in Switzerland which international usage has blurred. Read more Geneva · The birth of modern Geneva private bankingWhat is a private banker?
The private banker, in the traditional Swiss sense, is a banking institution organised as a general partnership or a limited partnership, whose partners with unlimited liability answer for the bank’s… Read more Geneva · The birth of modern Geneva private bankingThe legal forms: general partnership and limited partnership
Swiss law offers private bankers two forms of partnership. The general partnership brings together natural persons who jointly operate a commercial enterprise under a business name and whose… Read more Geneva · The birth of modern Geneva private bankingUnlimited liability as a signal of trust
Why would bankers agree to answer with their personal assets for the debts of their bank? The question deserves to be asked, because the limited liability of companies limited by shares is generally… Read more Geneva · The birth of modern Geneva private bankingThe partners: selection, co-option and succession
The life of a private bank rests on its partners. Their selection is a major strategic decision that commits the future of the house. Read more Geneva · The birth of modern Geneva private bankingThe collective institutions of the private bankers
The Geneva private bankers organised themselves collectively from the end of the nineteenth century. Read more Geneva · The birth of modern Geneva private bankingCulture and practices: discretion, sobriety, the long term
The status of private banker goes hand in hand with a professional culture that the Geneva houses have cultivated for generations. Read more Geneva · The birth of modern Geneva private bankingThe business model of private banking in the twentieth century
In the twentieth century, the business model of Geneva’s private bankers rests on several sources of revenue. Read more Geneva · The birth of modern Geneva private bankingThe transformation of 2014
In the early 2010s, the great Geneva houses decided to transform their legal structure. Read more Geneva · The birth of modern Geneva private bankingWhat remains of the model
Since 2014, private bankers in the strict sense have become rare in Switzerland. A recent source indicates that only a handful remain, among them certain Geneva houses. Read more Geneva · The birth of modern Geneva private bankingThe private banker in the imagination of the financial centre
The Geneva private banker occupies a singular place in the collective imagination. In the eyes of the public and of the clientele, he embodies continuity, discretion and solidity. Read more Geneva · The birth of modern Geneva private bankingDeath, withdrawal and succession of a partner
The life of a partnership is intimately bound up with that of its partners. The death, incapacity or withdrawal of a partner with unlimited liability raises legal and practical questions that private… Read more Geneva · The birth of modern Geneva private bankingThe partnerships of London and New York: a comparison
The model of the bank organised as a partnership is not peculiar to Switzerland. In London, the great houses of the City were for a long time partnerships, whose partners were personally answerable… Read more Geneva · The birth of modern Geneva private bankingThe private bankers in the life of the Geneva financial centre
In the twentieth century, the private bankers occupy an eminent place in the life of the Geneva financial centre that goes beyond their economic weight. Read more Geneva · The birth of modern Geneva private bankingThe private banker and his foreign clientele
The clientele of Geneva’s private bankers became international over the course of the twentieth century. Read more Geneva · The birth of modern Geneva private bankingThe accountability of executives: a contemporary reading
The tradition of personal liability among private bankers finds an echo in the recent debates on the accountability of bank executives. Read more Geneva · The birth of modern Geneva private bankingThe geography of Geneva’s bankers
Geneva’s banking houses were long concentrated in a few streets of the city, between the old town, the Rues Basses and the districts built after the demolition of the fortifications. Read more Geneva · The birth of modern Geneva private bankingChecklist: assessing a house organised as a partnership or run by partners
Identify the partners with unlimited liability, the exact legal structure of the group and the allocation of responsibilities between the holding entity and the operating entities. Read more Geneva · The birth of modern Geneva private bankingWar, crises and the Banking Act (1914-1934) — overview and summary
Between the outbreak of the First World War and the adoption of the Federal Act on Banks, the Swiss financial centre lived through two decades of upheaval. Read more Geneva · The birth of modern Geneva private bankingThe First World War: neutrality and the inflow of capital
Switzerland remained neutral during the First World War. That neutrality did not shield it from hardship: supplying the country became difficult, social tensions grew and culminated in the general… Read more Geneva · The birth of modern Geneva private bankingThe 1920s: Switzerland as a refuge for European capital
The post-war years were a period of monetary disorder in Europe. Germany and Austria experienced hyperinflation that destroyed the savings of millions of people. Read more Geneva · The birth of modern Geneva private bankingThe affair of the Banque commerciale de Bâle
In the early 1930s, the tax tensions between France and Switzerland burst into the open on the occasion of a resounding scandal. Read more Geneva · The birth of modern Geneva private bankingThe crisis of 1931 and the reorganisation of the banking sector
The world economic crisis, triggered by the Wall Street crash of October 1929, reached Europe in 1931. Read more Geneva · The birth of modern Geneva private bankingThe genesis of the law: from 1933 to 1934
The draft Federal Banking Act was launched at the beginning of 1933. According to a study of the history of Swiss banking regulation, the deliberations lasted twenty months, from February 1933 to… Read more Geneva · The birth of modern Geneva private bankingArticle 47: the criminal-law protection of secrecy
Article 47 of the law of 1934 punishes breaches of professional secrecy by persons who have access to banking information. Read more Geneva · The birth of modern Geneva private bankingA conciliatory and lightly restrictive law
The study of the history of Swiss banking regulation characterises the law of 8 November 1934 as a “conciliatory and lightly restrictive law”. Read more Geneva · The birth of modern Geneva private bankingThe myth of protecting the persecuted
A widespread interpretation presents the bank client secrecy of 1934 as a measure intended to protect the victims of Nazi persecution, in particular German Jews seeking to place their assets in… Read more Geneva · The birth of modern Geneva private bankingBank client secrecy in current law
Article 47 of the Banking Act still exists, in revised form. The Wikipedia article on bank client secrecy states that it now provides for a custodial sentence of up to three years for an intentional… Read more Geneva · The birth of modern Geneva private bankingThe Federal Banking Commission: birth of an authority
The law of 1934 created the Federal Banking Commission, the first federal authority charged with supervising the banking sector. Its resources were initially modest. Read more Geneva · The birth of modern Geneva private bankingExchange controls and the standstill agreements
The crisis of 1931 had another important consequence for the Swiss banks: the introduction of exchange controls in several countries, Germany in particular. Read more Geneva · The birth of modern Geneva private bankingThe League of Nations and the international tax question
The establishment of the League of Nations in Geneva in the aftermath of the First World War had an unexpected consequence for the financial centre: the city became the place where the first… Read more Geneva · The birth of modern Geneva private bankingThree types of institution in the face of the crisis
The crisis of the 1930s struck the institutions of the Geneva financial centre differently according to their business model. Read more Geneva · The birth of modern Geneva private bankingThe legacy of 1934 in today’s supervision
The law of 1934 has been revised many times, but it still forms the foundation of Swiss banking supervision. Read more Geneva · The birth of modern Geneva private bankingThe law of 1934 seen from Geneva
For the Geneva private bankers, the law of 1934 had two faces. It imposed new supervision, auditing requirements and publication rules, which altered the habits of houses attached to their… Read more Geneva · The birth of modern Geneva private bankingChecklist: observing bank client secrecy in practice
Identify precisely the information covered by secrecy and the persons who have access to it, and restrict that access to what is strictly necessary. Read more Geneva · The birth of modern Geneva private bankingThe Second World War and dormant assets: a contested memory — overview and summary
The Second World War occupies a special place in the history of the Swiss financial centre. Read more Geneva · The birth of modern Geneva private bankingSwitzerland between 1939 and 1945: neutrality and encirclement
When war broke out in September 1939, Switzerland proclaimed its neutrality and mobilised its army. Read more Geneva · The birth of modern Geneva private bankingThe financial centre during the war
Swiss banks carried on their business during the war in a profoundly disrupted environment. Relations with clients in the occupied countries became difficult, if not impossible. Read more Geneva · The birth of modern Geneva private bankingRefugees and asylum policy
Swiss policy towards refugees during the war is one of the most painful aspects of the period. The Bergier Commission devoted one of its principal studies to the subject. Read more Geneva · The birth of modern Geneva private bankingThe post-war period: the Washington Agreement
In the aftermath of the war, the Allies demanded that Switzerland return the looted gold it had bought from the Reichsbank and liquidate the German assets held on its territory. Read more Geneva · The birth of modern Geneva private bankingDormant assets: from oblivion to crisis
For several decades after the war, the question of the assets deposited in Switzerland by victims of Nazism remained unresolved. Read more Geneva · The birth of modern Geneva private bankingThe global settlement of 1998
On 12 August 1998 the big Swiss banks and the Jewish organisations reached a global settlement under which the banks undertook to pay USD 1.25 billion, at the time CHF 1.87 billion. Read more Geneva · The birth of modern Geneva private bankingThe Bergier Commission
The Independent Commission of Experts Switzerland – Second World War was established by a Federal Decree of 13 December 1996. Read more Geneva · The birth of modern Geneva private bankingWhat the financial centre learned from it
The dormant assets affair and the work of the Bergier Commission left a deep mark on the Swiss and Geneva financial centres. Read more Geneva · The birth of modern Geneva private bankingGeneva, the ICRC and the limits of humanitarian action
During the war Geneva was home to the International Committee of the Red Cross, whose activity expanded enormously. Read more Geneva · The birth of modern Geneva private bankingThe art trade and looted property
Among the subjects studied by the Bergier Commission is the trade in art and jewellery. Read more Geneva · The birth of modern Geneva private bankingThe legal questions raised by old assets
Claims relating to dormant assets raised complex legal questions that remain relevant to other historical disputes. Read more Geneva · The birth of modern Geneva private bankingThe memory of the war in the culture of the financial centre
The dormant assets affair and the Bergier Report brought about a profound change in the way the Swiss financial centre regards its history. Read more Geneva · The birth of modern Geneva private bankingBank archives and historical research today
The dormant assets affair opened a new period in relations between banks and historians. Read more Geneva · The birth of modern Geneva private bankingGeneva, city of refuge: an identity put to the test
Geneva has long thought of itself as a city of refuge. Parts B and C showed the importance of the reception of Protestant refugees in its history, and the city today houses the headquarters of… Read more Geneva · The birth of modern Geneva private bankingConclusion to Part D
Between 1815 and 1945 the Geneva financial centre took on its modern form. The houses founded in 1796, 1805 and 1819 became the pillars of a private banking sector specialising in wealth management,… Read more Geneva · The birth of modern Geneva private bankingChecklist: managing contactless assets and historical risk
Put in place procedures to identify relationships whose holders no longer make contact and document the steps taken to trace them. Read more