Foreign capital and the search for a domestic source of finance

Paris, Basel and Stuttgart: the international market for Swiss railway securities

The capital needs of the Swiss railways far exceeded the savings that the Swiss market could mobilise through the existing private banks. The Basel promoters of the Centralbahn recognised from the outset that the railway could not be built with Swiss means alone and that capital would have to be found abroad. In practice the shares of the Centralbahn were placed mainly with Parisian banks, with Basel banks and the two Basel cantons taking smaller portions. Speculation on the Paris bourse then caused the shares to fall from 500 to 200 francs, reducing the paid-in share capital to 14.5 million francs. Only the intervention of the cantons of Lucerne and Bern, Bernese municipalities and, in 1857, federal investment aid of 4 million francs and bonds of 12 million francs placed by Basel and Stuttgart banks rescued the company.¹

The Centralbahn was not an isolated case. The HLS notes that by 1861 four fifths of all Swiss railways were in economic difficulty and that French capital flowed into the companies of western and eastern Switzerland, which were reorganised through economically driven mergers. Foreign investors brought capital, but they also brought the risk that decisions on Swiss infrastructure would be taken abroad, according to the interests of foreign banks and competing foreign railways. The Basel founders of the Centralbahn tried to meet this risk by a voting structure that limited the influence of individual shareholders, so that the line remained, in the words of a recent account, a “national infrastructure” largely under the control of its Swiss promoters.² The device of restricting voting rights, which reappears in Swiss company law and practice throughout the twentieth century, was thus present at the birth of Swiss infrastructure finance.

Escher’s answer: the Schweizerische Kreditanstalt

Escher drew a different conclusion. He wanted a Zurich institution capable of raising capital itself, so that Swiss railways would depend less on the goodwill of foreign banks. The model was the Crédit Mobilier founded in Paris in 1852 by the brothers Émile and Isaac Pereire, a joint-stock bank that financed railways and industry by issuing its own securities to the public.³ A German partner took part from the outset: the Allgemeine Deutsche Credit-Anstalt of Leipzig is listed among the founders of the Schweizerische Creditanstalt.⁴

The Kreditanstalt was founded in July 1856. Its purpose, as a museum of finance puts it, was to fund the development of the railway infrastructure. The public response was overwhelming: shares worth 3 million francs were offered, and within three days subscriptions totalling 218 million francs were received. A recent account in the Neue Zürcher Zeitung stresses the motive of independence: Escher needed access to considerable financial resources for railway construction but wanted to obtain them without foreign influence. The bank’s early history, its universal-bank model and its later development are the subject of Chapter D.II. For the present chapter one point is decisive. From 1856 the Nordostbahn and the Kreditanstalt were led by the same man, who presided over the board of the bank from 1856 to 1877 and again from 1880 to 1882.⁵ The company that needed capital and the bank that supplied it were connected at the top.

Rival banks and regional capital

Escher’s bank did not remain alone. Other regions and political camps responded by founding banks of their own, often with railway finance among their stated purposes. In Bern the Eidgenössische Bank had as its president from 1864 to 1877 none other than Jakob Stämpfli, the former Federal Councillor and advocate of a state railway. In Winterthur, the Bank in Winterthur was founded in 1862 to finance trade, industry and railways. It merged in 1912 with the Toggenburger Bank to form the Schweizerische Bankgesellschaft, one of the two institutions that combined in 1998 to form today’s UBS.⁶ The rivalry between Zurich and Winterthur, which will reappear in the story of the Nationalbahn, thus has an institutional descendant in the banking landscape of today. The two big banks of late twentieth-century Switzerland descended, respectively, from Escher’s railway bank and from the bank of the Winterthur merchants who opposed him.

Notes

1. Huber, “Basel und die Eisenbahn” (cited above); Wikipedia (en), “Swiss Central Railway” (cited above), section on financing. ↩
2. HLS, “Eisenbahnen” (cited above), section “Die Bauperiode 1850–1870”; Huber, “Basel und die Eisenbahn” (cited above). The author quotes the share structure of 72,000 shares of 500 francs and describes voting limits designed to preserve Swiss control. ↩
3. Meyer, “Alfred Escher und die Züge für Zürich” (cited above), which describes the Kreditanstalt as founded after the Paris Crédit Mobilier model and as a means for thousands of small savers to invest in railway construction. The founding date and founders of the Crédit Mobilier are standard knowledge and are treated in Chapter D.II. ↩
4. Wikipedia (de), “Allgemeine Deutsche Credit-Anstalt”, https://de.wikipedia.org/wiki/Allgemeine_Deutsche_Credit-Anstalt, which lists the Schweizerische Creditanstalt Zürich among the banks the Leipzig institution helped to found. The account of the negotiations is given in more detail in Chapter D.II. ↩
5. Finanzmuseum (Zurich), “Bye bye Credit Suisse – An era of over 160 years comes to an end”, https://www.finanzmuseum.ch/en/home/blog/credit-suisse.html; Luca Froelicher, “The turbulent history of Credit Suisse”, NZZ (English edition), https://www.nzz.ch/english/the-turbulent-history-of-credit-suisse-ld.1732364. The article reports 442,539 subscription requests from Switzerland and abroad for the first share issue; HLS, “Escher, Alfred” (cited above). ↩
6. HLS, “Stämpfli, Jakob” (cited above); HLS, Meinrad Suter, “Winterthur”, version of 28 August 2015, https://hls-dhs-dss.ch/de/articles/000157/2015-08-28/. The 1998 merger of the Schweizerische Bankgesellschaft with the Schweizerischer Bankverein is treated in Part F. ↩

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.