Early business, 1856–1870

Railway finance and the Nordostbahn

The first and most important field of business was the financing of railways. The historical encyclopaedia describes the Kreditanstalt as a bank specialising in commercial credit and in the issuing of securities, with particular weight in the financing of railway transport.¹ The Nordostbahn stood at the centre of this business. According to the English-language encyclopaedic literature, a quarter of the bank’s revenues in its first year came from the Nordostbahn.² The same source also emphasises that the Zurich bank adopted a more conservative lending policy than its Paris model, concentrating on short- and medium-term loans. The Kreditanstalt thus combined the crédit mobilier function of issuing and placing railway securities with the more traditional commercial function of providing working credit.

In practice, the bank acted as the house bank of the Nordostbahn. The Swiss government’s portal on Escher states that the Kreditanstalt functioned as such a house bank and boosted railway construction across Switzerland.³ It placed the bonds and shares of the company, provided bridging credits during construction and managed the payment flows of an enterprise that was, for several decades, one of the largest employers and investors in eastern Switzerland. By 1858 the Nordostbahn had become the largest railway company of the region.⁴ The personal union between the leadership of the railway and that of its bank was complete, since Escher presided over both. The arrangement allowed quick decisions and a close coordination of construction and finance. It also concentrated risk: a crisis of the railway would inevitably become a crisis of the bank, and vice versa.

The significance of this relationship for the Zurich financial centre went beyond the single railway. By organising the finance of the Nordostbahn in Zurich, the Kreditanstalt brought the placing of large issues to the city. Investors who had previously bought foreign state loans through private bankers now bought Swiss railway bonds through a Swiss joint-stock bank. The trading of these securities formed one of the foundations of the Zurich stock market, whose organisation is described in Chapter D.IV. The link between the railway boom and the rise of the banking centre is the organising theme of the economist Nils Herger’s account of the period, which treats the railway boom, the rise of the big banks and the ascent of Zurich as a financial centre between 1848 and 1914 as a single process.⁵

Industry, commerce and the first losses

The founders had promised to finance industry as well as railways. The textile manufacturers who subscribed to the shares expected the bank to support their businesses. Before long, the Kreditanstalt held participations in Zurich firms and granted them commercial credit. Froelicher notes that the strategy of taking stakes in the burgeoning industry of Zurich proved prone to losses in the early years and that the balance sheet was filled with dangerous concentrations of risk.⁶ The historical encyclopaedia records a far-reaching reorganisation in the middle of the 1860s following credit losses and failed speculation.⁷ The American Civil War, which disrupted the supply of raw cotton and the markets for textiles, hit the industrial clients of the bank at the same time. According to an English-language company history, the Kreditanstalt posted its first loss in 1867, which remained its last loss until the 1990s.⁸

The difficulties of the 1860s have been read in two ways. Tobias Straumann has argued that Escher was not the most innovative entrepreneur of his time and that the real builders of Zurich’s prosperity were industrial firms such as Escher, Wyss & Cie. in textile machinery and engineering.⁹ In this reading, the bank followed a boom that others had created, while its early industrial participations reflected the enthusiasm of the moment more than a careful credit policy. The more benevolent reading sees the reorganisation of the 1860s as a period of learning, in which the bank discarded the most speculative elements of the crédit mobilier model and developed the practice of commercial credit on current account that would become the core of its business. A seminar study of the bank’s transformation between 1856 and 1914 describes precisely this shift from the acquisition of shares towards the current-account credit.¹⁰ The two readings are compatible, since a bank can learn from mistakes that it should not have made.

Whether the Kreditanstalt financed Escher Wyss directly in these years cannot be established from the sources consulted for this chapter. The general pattern is clear enough. The bank lent to the textile houses and engineering firms of the canton, held stakes in some of them and suffered with them when markets turned. The mechanical engineering industry of Zurich and Winterthur, which grew out of the textile machinery trade and later built locomotives, turbines and ships, belonged to the natural clientele of a bank of the new type. The lasting result was a close relationship between the big bank and the export industry of north-eastern Switzerland, a relationship that shaped the Swiss economy well into the twentieth century and that explains why the fate of the big banks has always been treated in Switzerland as a matter of national industrial policy.

Foreign issues, state loans and new financial companies

Although its original purpose was domestic, the Kreditanstalt soon took part in the international business in which the private bankers of Geneva and Basel had long been active. Swiss investors had bought foreign state loans since the eighteenth century, as Part C describes for the Zurich Zinskommission and the house of Leu. A joint-stock bank with a large capital and a broad investor base could underwrite such loans on its own account and place them with the public. The historical encyclopaedia’s account of the Swiss financial centre notes that the large commercial banks founded between 1850 and 1875 initially faced obstacles and achieved their decisive expansion only around the turn of the century, when a banking cartel formed that increasingly dominated the placement of public bonds.¹¹ The phase between 1856 and 1890 was therefore one of experiment, in which the Kreditanstalt learned the business of foreign issues alongside its domestic railway finance.

Company chronologies date the first international presence of the bank to 1870, when it is said to have begun operations in New York.¹² The nature of this early American engagement is not described in the sources consulted. It should not be imagined as a branch in the modern sense. The major international step came with the formation of specialised financing companies in the last quarter of the century, described below. What matters for the period before 1870 is the principle: from its earliest decades, the Kreditanstalt combined a domestic industrial and railway business with an international securities business. This combination, which foreshadowed the mixed character of the later Credit Suisse, was characteristic of the universal bank model in its Swiss form.

A founder of institutions: the Rentenanstalt (1857) and Swiss Re (1863)

One of the most durable effects of the Kreditanstalt lay in the institutions it helped to create. In 1857, only a year after its own foundation, the bank took part in establishing the Schweizerische Lebensversicherungs- und Rentenanstalt, today Swiss Life.¹³ The driving figure of the new life insurer was Conrad Widmer (1818–1903), a lawyer from Frauenfeld who directed it for some thirty-five years until 1892. Its first office stood near Paradeplatz.¹⁴ Escher himself sat on the supervisory board of the Rentenanstalt from 1857 to 1874.¹⁵ The history of the company, and of life insurance in Zurich more generally, belongs to Part E. For the present chapter it is enough to note the principle: the bank lent its capital, its prestige and its network to a long-term savings institution whose premiums would, in turn, flow into the securities market that the bank served.

The same pattern repeated itself in 1863 with the foundation of the Schweizerische Rückversicherungs-Gesellschaft, today Swiss Re. The occasion was the great fire of Glarus of 1861, which had shown that Swiss insurers lacked the capacity to cover catastrophic losses. On 19 December 1863, the Helvetia General Insurance Company of St. Gallen, the Kreditanstalt and the Basler Handelsbank founded the reinsurer with a capital of 6 million francs, of which 15 per cent was paid up. The founding document bears the signature of the poet Gottfried Keller, then first secretary of the canton of Zurich.¹⁶ Keller’s signature is a small but telling detail. It shows how closely the cantonal administration, the liberal elite and the new financial institutions were interwoven in the Zurich of the 1860s. It also reminds the reader that the city’s most famous writer earned his living for fifteen years in the service of the state whose economic policy he observed with a sharp eye.

The Rentenanstalt and Swiss Re are the best-known examples of a broader function of the Kreditanstalt as a promoter of other financial and industrial companies. A Swiss newspaper account of the end of Credit Suisse lists Swiss Life, Swiss Re and the Helvetia insurance group among the enterprises whose foundation the bank supported.¹⁷ In the terms of the crédit mobilier model, this was precisely the task of a bank of the new type: to identify an unmet economic need, to assemble the capital required and to place the resulting securities with investors. The difference from the Paris prototype lay in the choice of fields. The Zurich bank concentrated on institutions of long-term savings and risk-bearing, which strengthened the domestic capital market and would later become pillars of the Swiss financial centre in their own right. The cluster of banks and insurers that still defines Zurich’s financial profile today, with Swiss Re, Swiss Life and Zurich Insurance among its largest institutions, has one of its roots in these founding operations of the late 1850s and 1860s.

Notes

1. HLS, “Schweizerische Kreditanstalt (SKA)” (cited above): the SKA quickly became the leading commercial bank in Switzerland and concentrated on commercial credit and securities issuance, especially in railway finance. ↩
2. Wikipedia (English), “Credit Suisse” (cited above): “25% of the bank’s revenues were from the Swiss Northeastern Railway” in the first year. The same article describes the bank as structured after the Crédit Mobilier but with a more conservative lending policy focused on short- to medium-term loans. ↩
3. aboutswitzerland, “Alfred Escher: a visionary of modern Switzerland” (cited above), which describes the Kreditanstalt as a modern bank that functioned as a house bank and boosted railway construction across Switzerland. ↩
4. HLS, “Escher, Alfred” (cited above), which states that the NOB, founded in 1853 with Escher as director and later president, was by 1858 the largest railway company in eastern Switzerland. ↩
5. Nils Herger, “Railway Boom, the Big Banks, and the Ascent of Zurich as Financial Centre (1848–1914)”, in: Switzerland and its Banks, Springer, 2023, pp. 61–73, https://link.springer.com/chapter/10.1007/978-3-031-35904-0_5 (abstract and preview consulted). ↩
6. Froelicher, “The turbulent history of Credit Suisse” (cited above). ↩
7. HLS, “Crédit suisse” (cited above): the SKA had to be reorganised thoroughly in the mid-1860s because of credit losses and failed speculation. ↩
8. Encyclopedia.com, “Credit Suisse Group” (cited above): “Credit Suisse posted its first loss ever in 1867 and its last loss until the mid-1990s”, which the article connects with the effects of the American Civil War on Swiss textiles. ↩
9. Straumann, “Alfred Escher war nicht der innovativste Unternehmer seiner Zeit” (cited above), which names Escher, Wyss & Cie. as an example of the industrial enterprises that created the region’s wealth. ↩
10. Der Wandel des schweizerischen Bankensystems am Beispiel der Schweizerischen Kreditanstalt 1856 bis 1914, GRIN, https://www.grin.com/document/539575 (publisher’s preview consulted). The preview describes the Crédit Mobilier method of financing enterprises through the acquisition of their shares and the later development of the SKA towards current-account credit and universal banking. It is a student paper and is cited only as a summary of the argument. ↩
11. HLS, Sébastien Guex, “Place financière”, https://hls-dhs-dss.ch/textes/f/F45549.php. Guex argues that one can speak of a Swiss financial centre only from about 1890, notes the role of the banking cartel in the placing of public loans and describes Zurich, Basel and Geneva as a coordinated but still marginal centre by comparison with London, Paris and Berlin in 1914. ↩
12. FINANCE MUSEUM, “Bye bye Credit Suisse” (cited above), and Wikipedia (German), “Credit Suisse” (cited above), both of which date the beginning of international expansion, with a presence in New York, to 1870. The form of that presence (agency, participation or correspondent arrangement) is not specified in either source. ↩
13. aboutswitzerland, “Alfred Escher: a visionary of modern Switzerland” (cited above), which records the Kreditanstalt’s part in founding the Schweizerische Lebensversicherungs- und Rentenanstalt in 1857. ↩
14. Swiss Life Group, “Our history”, https://www.swisslife.com/en/home/about-us/our-history.html, with Widmer’s dates, his long directorship and the first office near Paradeplatz. ↩
15. HLS, “Escher, Alfred” (cited above), with Escher’s membership of the supervisory board of the Rentenanstalt from 1857 to 1874. ↩
16. Swiss Re, “Established 1863”, https://www.swissre.com/about-us/history/established-1863.html. The page also records that the company was registered in a two-room apartment at Schoffelgasse 1 in Zurich and that Georg Schmidt was its first manager. ↩
17. Blick, “Das Ende der Credit Suisse” (cited above), which lists Swiss Life, Swiss Re, Helvetia and a predecessor of UBS among the institutions that the SKA helped to found. ↩

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.