Crises and consolidation, 1870–1914

The largest bank in Switzerland

By the end of the Franco-German War of 1870 and 1871, the Kreditanstalt had become the largest bank in Switzerland.¹ The historical encyclopaedia likewise describes it as having quickly become the leading commercial bank of the country.² The position was the result of a combination of factors: the scale of its capital, the concentration of railway finance in Zurich, the reorganisation of the 1860s and the absence of a comparable competitor in the other Swiss cities. Basel had its private bankers and, from 1862, the Basler Handelsbank. Geneva had lost its crédit mobilier experiment. Bern had the Eidgenössische Bank from 1863, described below. None of these institutions matched the Kreditanstalt in size or reach. The Zurich bank’s leadership would be contested seriously only after the formation of the Basler Bankverein in 1872 and its transformation into the Schweizerischer Bankverein in 1898.

The railway crisis of the 1870s and the Gotthard

The 1870s brought a severe test. The international crisis that began in 1873, together with an overexpansion of Swiss railway construction and fierce competition between the private companies, hit the Nordostbahn with particular force. Its shares fell from 670 francs in 1871 to 53 francs in 1879. From 1877 the company was unable to pay dividends and asked the federal authorities to release it from part of its construction obligations.³ The historical encyclopaedia connects the crisis of the Nordostbahn with the economic depression of 1876 and the competition between railways.⁴ Investors who had bought the company’s shares at their peak blamed Escher, although he had resigned as president of its directorate in 1871.⁵

At the same time, the great project of Escher’s later years, the railway through the Gotthard, ran into financial difficulties. The Gotthardbahn-Gesellschaft had been founded in Lucerne in 1871, after Italy and the North German Confederation, later the German Reich, had committed themselves to subsidies, with Escher as president of its directorate.⁶ The original estimate of 187 million francs was exceeded by 102 million francs, bringing the company close to bankruptcy in 1877. Germany and Italy provided additional subsidies, and Switzerland had to contribute as well, amid fierce political debate. The Kreditanstalt was the central Swiss financial instrument of the project. Its detailed role in the Gotthard finance, including the international banking consortium that placed the company’s capital, is described in Chapter D.VI.

Escher’s resignation and return

The double crisis of the Nordostbahn and the Gotthard undermined Escher’s position at the bank. The historical encyclopaedia records that the delays in the Gotthard construction and the need for federal subsidies forced him to resign as president of the Kreditanstalt board in 1877 and as president of the Gotthard directorate in 1878.⁷ In 1880, however, Escher returned to the presidency of the bank, which he held until his death on 6 December 1882. His exclusion from the celebrations of the tunnel breakthrough in 1880 and his absence from the opening of the line in 1882 have become part of the tragic narrative of his last years.⁸ The bank’s willingness to recall its founder after only three years suggests that the board regarded his authority as indispensable even after the crisis.

The period of Escher’s withdrawal and death coincided with the transition of the Kreditanstalt from a founder’s institution to a professionally managed bank. The historical encyclopaedia notes that the bank weathered the depression of the 1880s without major damage.⁹ The survival was not a matter of course. Several Swiss banks of the crédit mobilier generation failed or had to be restructured in these decades, while the railway companies whose securities filled the portfolios of Swiss investors lost a large part of their value. The Kreditanstalt’s ability to absorb these shocks reflected the more conservative credit policy it had adopted after the losses of the 1860s and the diversification of its business beyond the Nordostbahn.

The palace on Paradeplatz

The most visible legacy of these decades is the building that still dominates Paradeplatz. The square had been known in the seventeenth century as the Säumärt, the pig market, was renamed Neumarkt in 1819 and received its present name around 1865, after the military parades held near the arsenal. At its eastern end, the Austrian Johannes Baur had opened the Hôtel Baur en Ville in 1838, the first and at the time the most distinguished hotel for foreign visitors in the city.¹⁰ The Kreditanstalt established itself on the north side of the square in 1873. Its new headquarters, a sandstone palace in the style of the Italian Renaissance revival, was built between 1873 and 1876 to designs by Jakob Friedrich Wanner.¹¹

The choice of architect is revealing. Wanner (1830–1903), who had emigrated from Württemberg, had worked for the Nordostbahn from 1857 and became its chief architect in 1861. In that capacity he completed the new main station of Zurich, working from a draft by Gottfried Semper, before turning to the headquarters of the Kreditanstalt.¹² Sharing a president, the railway and its bank also shared an architect, so that the two great public buildings of Escher’s Zurich, the station and the bank, came from the same drawing board. The bank’s palace announced a claim to permanence and public dignity that the modest premises of the private bankers had never made. With its move to Paradeplatz, the Kreditanstalt fixed the centre of gravity of Zurich banking at the southern end of the Bahnhofstrasse, where it has remained.

Other banks followed. The Schweizerischer Bankverein built its first Zurich building on the west side of the square in 1897 to 1899, while the Zürcher Kantonalbank also had its first seat on Paradeplatz.¹³ By the turn of the century, the square had become the symbolic heart of Swiss banking, a status it has retained even after the disappearance of Credit Suisse. Swiss usage still employs “Paradeplatz” as a metonym for the big banks, in the same way that “the City” stands for London finance and “Wall Street” for American finance.

Financing companies and international business

From the late 1870s onwards, the Kreditanstalt developed a new instrument for its international business: the specialised financing company, which held participations in foreign railway and industrial enterprises and financed them through its own share and bond issues. The historical encyclopaedia records the bank’s participation in founding the Schweizerische Eisenbahnbank in 1879, the Bank für orientalische Eisenbahnen in 1890 and the Bank für elektrische Unternehmungen in 1895, later known as Elektrowatt.¹⁴ These companies extended the crédit mobilier idea into a new form. The bank no longer held large industrial participations on its own balance sheet, as it had done in the 1850s and 1860s, but promoted separate holding companies that did so, whose shares and bonds it placed with investors.

The Bank für orientalische Eisenbahnen illustrates the international reach of this structure. It arose in 1890 when Baron Moritz von Hirsch sold his shares in the Chemins de fer Orientaux, the railway company of the Ottoman Balkans, to the Deutsche Bank and the Wiener Bankverein. The new holding company, known as the Orientbank, had a capital of 50 million francs, of which 20 per cent was initially paid up. Its shareholders included, besides the German and Austrian banks, the Kreditanstalt, the Basler Handelsbank and the Eidgenössische Bank, together with French, English and Austro-Hungarian investors. Its administrative seat was in Vienna, while its administration was carried out by the Kreditanstalt in Zurich.¹⁵ A Zurich bank thus managed a holding company for a railway in the Balkans, owned by a consortium of German, Austrian, Swiss and western European investors. The arrangement anticipated a function that the Swiss financial centre would perform throughout the twentieth century: the neutral administrative platform for international holding and financing structures.

The Bank für elektrische Unternehmungen, known as Elektrobank, was founded in Zurich in 1895 on the initiative of the Berlin Allgemeine Elektricitäts-Gesellschaft (AEG), which was seeking new markets. Its purpose was the financing, construction and operation of electricity companies. In 1946 it took the name Elektrowatt.¹⁶ The electrification of Europe required capital on a scale comparable to the railway construction of the preceding decades. The model of the Zurich financing company allowed German industrial know-how to be combined with Swiss capital and Swiss legal and fiscal conditions. Several similar companies were founded in Switzerland in these years. The structure foreshadowed the holding company privileges that cantonal tax law later granted and that made Switzerland, and Zurich and Zug in particular, a preferred domicile for international holding companies in the twentieth century.

The Kreditanstalt also developed its services for investors in these years. In 1895 it began publishing the Effekten-Kursblatt, which the bank’s later historiography describes as the first regularly appearing bank publication in the world and which was renamed Bulletin in 1944.¹⁷ The claim to world priority may be difficult to verify, but the publication itself reflected a change in the bank’s clientele. By the 1890s, the Kreditanstalt served a broad public of private investors who needed regular information on the prices of the securities they held, and the bank competed with the other big banks for their custody and advisory business. The later private banking and wealth management of Credit Suisse, which became its most profitable business line in the late twentieth century, had one of its roots in this service to the securities-holding middle class of the late nineteenth century.

Branches, the National Bank and the eve of war

Until the beginning of the twentieth century, the Kreditanstalt was essentially a Zurich bank with national and international business. Its expansion across Switzerland began only in 1905, when it opened its first branch in Basel. The first branches in French-speaking and Italian-speaking Switzerland followed in Geneva in 1906 and in Lugano in 1913.¹⁸ Part of this expansion took place through the acquisition of regional banks.¹⁹ On the eve of the First World War the bank had, according to one company history, thirteen locations in Switzerland and more than a thousand employees.²⁰

The timing of the branch expansion is significant. The Swiss National Bank began operations in 1907 and took over the issue of banknotes, a monopoly that the note-issuing banks had previously shared (see Part C and Part F).²¹ The creation of a national central bank and of a unified currency circulation removed one of the reasons for the regional fragmentation of Swiss banking. Sébastien Guex has argued that one can speak of a unified Swiss financial centre only from about 1890, when the large commercial banks founded between 1850 and 1875 achieved their decisive expansion, established networks of branches across the country and formed a cartel that increasingly dominated the placement of public loans.²² The Kreditanstalt’s branch expansion from 1905 belongs to this process of national integration. By 1914, Zurich, Basel and Geneva formed a coordinated financial centre, which nevertheless remained, in Guex’s assessment, marginal compared with London, Paris or Berlin. The First World War, which damaged the international business of the Kreditanstalt, opened the period in which that assessment would change.²³

Notes

1. Encyclopedia.com, “Credit Suisse Group” (cited above): “by the end of the Franco-Prussian War in 1871, Credit Suisse was the largest bank in Switzerland.” The English-language Wikipedia article gives the same assessment with the date 1870. ↩
2. HLS, “Crédit suisse” (cited above). ↩
3. Wikipedia (English), “Swiss Northeastern Railway” (cited above), with the share prices of 1871 and 1879, the suspension of dividends from 1877 and the request for relief from construction obligations. ↩
4. HLS, “Escher, Alfred” (cited above), section on his last years: the depression of 1876 and railway competition brought the NOB into severe crisis. ↩
5. Wikipedia (German), “Alfred Escher” (cited above): “Die verärgerten Anleger sparten in der Folge nicht mit Kritik an Escher, obwohl dieser 1871 als Direktionspräsident der Nordostbahn zurückgetreten war.” ↩
6. Wikipedia (German), “Gotthardbahn-Gesellschaft”, https://de.wikipedia.org/wiki/Gotthardbahn-Gesellschaft. The article describes the international subsidies, the cost estimate of 187 million francs, additional costs of 102 million francs, the near-bankruptcy of 1877 and the supplementary subsidies of Germany, Italy and Switzerland. ↩
7. HLS, “Escher, Alfred” (cited above): the delays and the need for federal subsidies forced Escher’s resignation as SKA board president (1877) and Gotthard director-president (1878). ↩
8. HLS, “Escher, Alfred” (cited above), on his exclusion from the celebration of the breakthrough of 1880 and his declining to attend the opening of 1882 for reasons of health, and on the statue by Richard Kissling unveiled at Zurich station in 1889. ↩
9. HLS, “Schweizerische Kreditanstalt (SKA)” (cited above). ↩
10. Wikipedia (German), “Paradeplatz (Zürich)”, https://de.wikipedia.org/wiki/Paradeplatz_(Z%C3%BCrich), with the successive names of the square, the Hôtel Baur en Ville of 1838, the establishment of the Kreditanstalt on the north side in 1873 and the first building of the Bankverein on the west side (1897–1899). ↩
11. Limmattaler Zeitung, “Vom Säumärt zum Paradeplatz und zurück” (cited above), which dates the construction to 1873–1876 and names Wanner as architect. The English-language Wikipedia article on Credit Suisse gives 1876 as the year of inauguration. ↩
12. Wikipedia (English), “Jakob Friedrich Wanner”, https://en.wikipedia.org/wiki/Jakob_Friedrich_Wanner, with his dates, his career at the Nordostbahn from 1857 and as principal architect from 1861 to 1871, the main station of Zurich and the Credit Suisse headquarters (1872–1877). ↩
13. Limmattaler Zeitung, “Vom Säumärt zum Paradeplatz und zurück” (cited above), on the first location of the ZKB at Paradeplatz; Wikipedia (German), “Paradeplatz (Zürich)” (cited above), on the Bankverein building of 1897–1899. ↩
14. HLS, “Schweizerische Kreditanstalt (SKA)” (cited above), which lists the Schweizerische Eisenbahnbank (1879), the Bank für orientalische Eisenbahnen (1890) and the Bank für elektrische Unternehmungen (1895, later Elektrowatt) and dates the beginning of the domestic branch network to 1905. ↩
15. Wikipedia (German), “Chemins de fer Orientaux”, https://de.wikipedia.org/wiki/Orientalische_Eisenbahn, section on the Bank für orientalische Eisenbahnen: “Der administrative Sitz der Orientbank war in Wien, die Verwaltung erfolgte aber durch die SKA in Zürich.” ↩
16. Wikipedia (English), “Elektrowatt”, https://en.wikipedia.org/wiki/Elektrowatt, on the foundation in Zurich in 1895 at the initiative of AEG and the purpose of the holding company; the participation of the SKA is recorded by the HLS article cited above. ↩
17. Wikipedia (German), “Credit Suisse” (cited above), on the Effekten-Kursblatt of 1895, described as “die erste regelmässig erscheinende Bankpublikation der Welt”; the renaming as Bulletin in 1944 is recorded in the same place. ↩
18. Wikipedia (German), “Credit Suisse” (cited above): “Mit der Eröffnung der ersten Filiale in Basel 1905 begann die Expansion der SKA in der Schweiz”, followed by Geneva (1906) and Lugano (1913). ↩
19. Markenlexikon, “Credit Suisse” (cited above), which states that domestic growth proceeded partly through the acquisition of regional banks and names Basel (1905), Geneva (1906) and Lugano (1913). ↩
20. Encyclopedia.com, “Credit Suisse Group” (cited above), which records thirteen locations in Switzerland and a workforce exceeding 1,000 before the First World War. ↩
21. HLS, Cassis, “Banken” (cited above), on the legal foundation of the Swiss National Bank in 1905 and its establishment in 1907 as the missing central banking element. ↩
22. HLS, Guex, “Place financière” (cited above). ↩
23. Wikipedia (French), “Crédit suisse”, https://fr.wikipedia.org/wiki/Cr%C3%A9dit_suisse, which notes that the First World War caused the bank to suffer in its international operations and records the acquisition of the Geneva bank Marcuard & Cie in 1919. ↩

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.