Bern, Zurich and the opening of 20 June 1907

The divided seat

The seat question, which had contributed to the failure of 1897, was solved in 1905 by division. Tanner’s formulation in the Historical Dictionary of Switzerland is precise: the legal and administrative seat of the bank is Bern, whereas the seat of the Governing Board, the highest executive authority, is Zurich.¹ Richli describes the same solution as the division of the head office between the cities of Bern and Zurich, which allowed the statute to pass.

The political reasons for this division are easy to reconstruct. Bern was the federal capital, the seat of the Federal Council and of the federal administration, where the Confederation’s own finances were managed. A central bank whose legal home was elsewhere would have been difficult to justify to the federalist and francophone opponents of 1897, who wanted the bank to remain close to the political institutions that supervised it. Zurich, on the other hand, was by the turn of the century the country’s leading commercial and financial city. It had the largest stock exchange, the headquarters of the Schweizerische Kreditanstalt and of other large banks, the most important money market and a concentration of industrial firms, insurance companies and trading houses that had no equivalent in Bern. As earlier chapters of this book have shown, the Kreditanstalt of Alfred Escher, the Zurich stock exchange and the Zürcher Kantonalbank had given the city a financial infrastructure that the central bank needed if its discount and open market operations were to have any effect. The directorate had to sit where the bills were drawn and discounted.

The Zurich seat of the Governing Board was therefore a recognition of economic reality. It was also a statement about the character of the new institution. A central bank whose executive worked among bankers and merchants would think in terms of the money market, the exchange rate and the convertibility of its notes. The later history of the bank, with its strong commitment to the gold standard and its reluctance to finance the state, reflects in part this proximity to the financial community. Harold James has noted that the bank was conceived as a way of rationalising the payments system in a small country on the fringes of the interconnected world. In practice, the payments system of that small country was centred on Zurich.

The buildings followed the constitutional arrangement with some delay. In Bern, the head office on the Bundesplatz, facing the Federal Palace, was inaugurated on 20 January 1912. In Zurich, the main building was completed and occupied in 1922.² The Zurich building was designed by the brothers Otto and Werner Pfister, whose firm was among the most prominent in the city between the wars. The Swiss National Bank itself published a monograph on the building in 2022, describing it as a representative office building and a principal work of Swiss neoclassicism that has marked the cityscape ever since. The publisher’s description notes that the Zurich building was completed a decade after the administrative head office in Bern and sets its construction against the emergence of Zurich as a financial hub.³ The architecture expresses the self-image of the institution in the early 1920s: monumental without ostentation, solid, closed to the street and devoid of decoration that might suggest speculation.

The opening and the first Governing Board

The Swiss National Bank opened for business on 20 June 1907. Its first Governing Board consisted of three members, each at the head of a department. Heinrich Kundert led Department I from 1907 to 1915, Rodolphe de Haller Department II and August Burckhardt Department III. After Kundert’s departure in 1915, Burckhardt moved to Department I, which he headed until 1924. Gottlieb Bachmann joined the board in 1918, took over Department I in 1925 and led it until 1939, when he became President of the Bank Council. Ernst Weber, who joined in 1925, succeeded him at the head of Department I in 1939.⁴ The head of Department I presided over the Governing Board and was thus the chief executive of the bank.

The transition from thirty-six issuers to a single central bank did not happen overnight. In Tanner’s words, the SNB centralised a note-issuing right that had until then been exercised by thirty-six “Zeddelbanken”. The old banks of issue withdrew their notes gradually and completed the liquidation of their note business by 1910.⁵ In the meantime, the national bank issued so-called interim notes, which were based on the designs of the earlier cantonal bank notes and already included a 1,000-franc denomination. The first series designed specifically for the national bank followed in 1911, with images by Ferdinand Hodler and Eugène Burnand, among them Hodler’s woodcutter.⁶ By 1913, according to a recent study of the note circulation, almost two million 50-franc notes and 1.4 million 100-franc notes were in circulation, while the high denominations of 500 and 1,000 francs were counted only in tens of thousands.⁷ Everyday payments were still made largely in coin, and in particular in the silver five-franc pieces of the Latin Monetary Union.

Monopoly, gold and the discount rate

The new bank had a clearly defined legal framework. Holding the exclusive right to issue banknotes, it was obliged to redeem its notes in legal tender coin and had to hold a metallic cover of at least 40 per cent of the notes in circulation. The Historical Dictionary of Switzerland notes that the federal statute of 1905 fixed the gold cover of the notes at 40 per cent and places this rule in the context of the Latin Monetary Union, of which Switzerland was a member and whose evolution from bimetallism to a de facto gold standard it followed.⁸ Richli adds that the 1905 act required the bank to redeem its notes in gold and silver at the parities of the Latin Monetary Union.

Within this framework the bank had three instruments. It could discount bills of exchange and lend against collateral, setting the discount rate at which it did so. It could buy and sell Swiss securities. It could also deal in foreign exchange, buying foreign bills and balances when the franc was strong and selling them when it weakened. The Historical Dictionary of Switzerland describes precisely these three instruments and notes that the bank held metallic reserves above the legally required minimum throughout the pre-war years.⁹ The foreign exchange instrument was particularly important for a small open economy whose currency had traded persistently below parity against the French franc in the decades before 1907. By holding foreign bills and gold, and by raising its discount rate when necessary, the national bank could now defend the franc in a way that none of the old banks of issue had been able to.

The national bank also took on a function that was less visible but important for the Zurich financial centre: the organisation of the national payments system. Through its offices and agencies, its giro accounts and its clearing arrangements, it reduced the costs of moving money between the regions. The fragmentation of the old system, in which notes of distant issuers circulated at a discount and each bank had to maintain reserves against sudden redemption, came to an end. For the big commercial banks of Zurich, Basel and Geneva, the national bank became the lender of last resort in the classical sense: a source of liquidity against good collateral in times of stress. This function would be tested for the first time barely seven years after the opening, and far more severely than anyone had expected in 1907.

Notes

1. Tanner, “Schweizerische Nationalbank (SNB)” (HLS), on the legal-administrative seat in Bern and the seat of the Governing Board in Zurich, https://hls-dhs-dss.ch/de/articles/013747/2015-06-29/. ↩
2. Swiss National Bank, “The history of the SNB”, https://www.snb.ch/en/the-snb/organisation/history, which gives 20 January 1912 for the inauguration of the head office on the Bundesplatz in Berne and 1922 for the completion and occupation of the main building in Zurich. ↩
3. Swiss National Bank (ed.), The Swiss National Bank in Zurich (Scheidegger & Spiess, 2022), publisher’s description, https://www.scheidegger-spiess.ch/produkt/the-swiss-national-bank-in-zurich/256. The description names Otto and Werner Pfister as architects and refers to the building as a main work of Swiss neoclassicism. ↩
4. Swiss National Bank, “Short biographies”, https://www.snb.ch/en/the-snb/organisation/history/short-biographies, and “Das Direktorium der Schweizerischen Nationalbank seit 1907” (overview), https://www.snb.ch/dam/jcr:7a9b5312-c9fe-4cab-a2a6-de0c80f4196f/hist_bios_dm_overview.de.pdf. The two documents give the members’ departments and years of office. They differ slightly on the dates of Adolf Jöhr’s membership. ↩
5. Tanner, “Schweizerische Nationalbank (SNB)” (HLS), https://hls-dhs-dss.ch/de/articles/013747/2015-06-29/, on the 36 “Zeddelbanken”; Püntener, “Notenbanken” (HLS), https://hls-dhs-dss.ch/de/articles/013746/, on the liquidation of their note business by 1910. ↩
6. swissinfo.ch, “Die Geschichte der Schweizer Banknoten”, 6 April 2016, https://www.swissinfo.ch/ger/die-geschichte-der-schweizer-banknoten/42070664, on the interim notes of 1907, the 1,000-franc note and the 1911 series with artwork by Hodler and Burnand. ↩
7. Sven Gerhard, “Von Gold und Silber zum Papier – Der Banknotenumlauf in der Schweiz 1907 bis 1939”, geldscheine-online.com, 17 September 2024, https://www.geldscheine-online.com/post/von-gold-und-silber-zum-papier-der-banknotenumlauf-in-der-schweiz-1907-bis-1939. The figures for 1913 are 1.97 million 50-franc notes, 1.43 million 100-franc notes, about 34,000 500-franc notes and 14,000 1,000-franc notes. ↩
8. Martin Kloter, “Goldwährung”, in: HLS, version of 4 January 2007, https://hls-dhs-dss.ch/de/articles/013742/2007-01-04/. See also: Richli, “Der Schweizer Franken und sein Wert”, p. 12, https://www.unilu.ch/fileadmin/universitaet/unileitung/dokumente/universitaetsreden/Unireden_26.pdf. ↩
9. Historisches Lexikon der Schweiz, “Geld- und Währungspolitik”, version of 26 August 2010, https://hls-dhs-dss.ch/de/articles/013748/2010-08-26/, section on the classical gold standard 1907–1914. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.