Railways, foreign capital and the decision to found a Swiss bank

The capital needs of the private railways

The immediate occasion for the foundation of the Kreditanstalt lay in the railway policy of the young federal state. The federal Railway Act of 1852, described in Chapter D.I, left the construction and operation of railways to private companies operating under cantonal concessions.¹ Having been the leading advocate of this solution in the National Council, Escher became the dominant figure of the Schweizerische Nordostbahn, formed on 1 July 1853 through the merger of the Schweizerische Nordbahn, the company of the “Spanisch-Brötli-Bahn” between Zurich and Baden, with the Zürich-Bodensee-Bahn.² The private model had political advantages in a federal state that distrusted central power and had few federal revenues. Its price was a need for capital on a scale that Switzerland had never before mobilised for a single sector.

The Zurich founders of the Nordostbahn illustrated the problem themselves. The historian Tobias Straumann has pointed out that the cantons of Zurich and Thurgau and the cities of Zurich and Winterthur contributed 4 million francs to the founding capital of the Nordostbahn, which amounted to 15 million francs.³ Even a company promoted by the political and commercial elite of the leading industrial canton thus relied on public money for more than a quarter of its equity. The larger sums required for construction had to come from bond issues, for which the domestic market was thin. The private bankers of Zurich, Basel and Geneva were accustomed to managing family fortunes and to placing foreign state loans. Their houses were not organised to underwrite the continuous stream of railway securities that a national network demanded.

The Nordostbahn’s own history, and Escher’s biography in the German-language encyclopaedic literature, stress the consequence. Because no institution in Switzerland could provide money on the scale required, the capital had to be obtained abroad.⁴ Foreign lenders, however, expected influence in return for their money. Paris financiers were active in the western Swiss railways, and German financial houses were watching the lines of the north and east. A railway network owned by private companies whose finance depended on foreign banks raised the prospect that decisions about routes, tariffs and mergers would be taken in Paris, Frankfurt or Leipzig. For a generation that had just fought for a federal state and a single national market, such a prospect was politically intolerable.

Leipzig and the question of control

The concrete trigger for the foundation of a Zurich bank came from Germany. In the spring of 1856, the newly created Allgemeine Deutsche Credit-Anstalt of Leipzig took an interest in Swiss business. The historiography of the Kreditanstalt connects its foundation with a Leipzig-backed plan to establish a credit bank in Switzerland. Accounts drawing on Joseph Jung’s history of the bank describe how Escher responded by taking the project into his own hands, so that the new institution would be established in Zurich under Swiss control but with the participation of the Leipzig bank.⁵ The German-language encyclopaedic entry on Credit Suisse states that Escher founded the bank on 5 July 1856 together with the Allgemeine Deutsche Credit-Anstalt and that the Leipzig bank held half of the share capital.⁶ A German brand encyclopaedia repeats the equal division of the founding capital between Escher’s circle and the Leipzig bank.⁷

The paradox is evident. A bank founded to protect the Swiss railways from foreign financial control accepted a German institution as a founding shareholder with a claim to half the capital. The resolution of the paradox lies in the difference between participation and control. The Leipzig investors brought capital, experience of the new banking model and connections to German markets, while the seat, the statutes, the board and the management of the new bank remained in Zurich and in the hands of Escher and his associates. In practice, the enormous response of the Swiss and foreign public to the share issue, described below, reduced the dependence on any single outside shareholder. The English-language encyclopaedic literature places the emphasis on French influence and states that the bank was created primarily to provide domestic funding for railway projects and to avoid the French banks that sought influence over the Swiss railways.⁸ Both readings are compatible. The concern was foreign control in general, from whichever direction it came. The Leipzig connection was accepted because it could be contained within a Zurich institution.

The political language of the time expressed this concern in national terms. The economic historian Luca Froelicher summarises Escher’s position in the observation that he needed access to considerable financial resources for the construction of railways but wished to obtain them independently of foreign influence, and that he envisaged the new bank as a “steam engine of credit”.⁹ A regional newspaper retelling of the origins of the banking centre states the purpose more briefly: the bank was founded to be independent of foreign lenders.¹⁰ The theme of financial sovereignty, which recurs in Swiss debates from the railway nationalisation of 1898 to the regulation of systemically important banks after 2008, thus stood at the very beginning of the Kreditanstalt’s history.

Notes

1. Swiss Federal Department of Foreign Affairs, aboutswitzerland, “Alfred Escher: a visionary of modern Switzerland”, https://www.aboutswitzerland.eda.admin.ch/en/alfred-escher-a-visionary-of-modern-switzerland. The page states that the Railway Act of 1852 placed railway construction and operation in private hands and that Escher founded the Kreditanstalt in 1856 to gain more independence in raising capital for the Nordostbahn. ↩
2. Wikipedia (English), “Swiss Northeastern Railway”, https://en.wikipedia.org/wiki/Swiss_Northeastern_Railway. The article records the merger of 1 July 1853, Escher’s role as its architect and his advocacy, together with the economist Bruno Hildebrand, of private railway finance and of the creation of the Kreditanstalt. ↩
3. Tobias Straumann, “Alfred Escher war nicht der innovativste Unternehmer seiner Zeit”, Neue Zürcher Zeitung, 8 May 2019, https://www.nzz.ch/feuilleton/alfred-escher-war-nicht-der-innovativste-unternehmer-seiner-zeit-ld.1457192. Straumann, an economic historian at the University of Zurich, gives the figures for the founding capital of the Nordostbahn and the public contributions to it. ↩
4. Wikipedia (German), “Alfred Escher”, https://de.wikipedia.org/wiki/Alfred_Escher, section on the Kreditanstalt: “Das Kapital musste aus dem Ausland bezogen werden, weil es in der Schweiz keine Institutionen gab, die Geld in diesen Grössenordnungen zur Verfügung stellen konnten.” The article continues that Escher was tired of this constellation and founded the Kreditanstalt in 1856 primarily to secure the financing of his Nordostbahn. ↩
5. This summary follows the account generally given in the literature on the SKA, in particular Joseph Jung’s history of the bank. ↩
6. Wikipedia (German), “Credit Suisse”, https://de.wikipedia.org/wiki/Credit_Suisse, section on history, which cites Joseph Jung, Von der Schweizerischen Kreditanstalt zur Credit Suisse Group, NZZ-Verlag, 2000, as its principal source. The article states that the ADCA held 50 per cent of the equity. ↩
7. Markenlexikon, “Credit Suisse”, https://www.brandslex.de/markenlexikon/cover/c/markenlexikon-credit-suisse, which states that Escher and the ADCA founded the SKA in Zurich in July 1856 and describes the ownership as split 50:50. ↩
8. Wikipedia (English), “Credit Suisse”, https://en.wikipedia.org/wiki/Credit_Suisse, section “History”. The article names Albert Dufour-Féronce, Alfred Escher and Gustav Harkort as founders, which corresponds to the Leipzig participation, and emphasises the avoidance of French influence. ↩
9. Luca Froelicher, “The turbulent history of Credit Suisse”, Neue Zürcher Zeitung (English edition), https://www.nzz.ch/english/the-turbulent-history-of-credit-suisse-ld.1732364. Froelicher, an economic historian, describes Escher as the “powerful Zurich railroad king” and the bank as modelled on the Crédit Mobilier. ↩
10. Limmattaler Zeitung, “Vom Säumärt zum Paradeplatz und zurück – oder: Wie der Bankenplatz Zürich entstand”, https://www.limmattalerzeitung.ch/limmattal/zuerich/historisch-system-escher-und-demokraten-im-wettstreit-oder-wie-der-bankenplatz-zuerich-entstand-ld.2433825: the SKA was founded “um von ausländischen Geldgebern unabhängig zu sein”. ↩

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.