The end of the banking cartel

The Cartel Commission and the conventions

While the property market was still booming, the federal competition authorities had begun to examine the agreements through which Swiss banks coordinated their prices. In June 1985 the Cartel Commission opened an investigation into the effects of the nationwide conventions of the Swiss Bankers Association on competition. Its report of 1989 concluded that Convention IV, which laid down uniform rules for calculating fees on open securities deposits, eliminated price competition in the custody business and produced effects that were economically harmful. It recommended that the convention be abolished. In July 1989 the association modified the agreement, but on 10 September 1990 the Federal Department of Economic Affairs issued an order dissolving Convention IV with effect from 31 December 1992.¹

The Swiss Bankers Association challenged the order before the Federal Supreme Court, and on 25 October 1991 the court upheld its appeal. The judges held that the department had not examined the matter independently and had failed to address the submissions that the parties had made on the Cartel Commission’s report. The decision was annulled and the case sent back for a new procedure.² The judgment is sometimes read as a victory for the cartel, but its reasoning was procedural. It did not endorse the conventions on their merits. In practice the political and economic climate had already turned against them. The report of the Cartel Commission had made clear that the traditional agreements would no longer be tolerated. Moreover, the banks themselves were divided. The big banks, which could compete on price with their size and their technology, had less interest in the conventions than the small and medium-sized institutions, which relied on the fixed margins for their survival.

The Federal Act on Cartels and other Restraints of Competition of 1995, which came into force in 1996 and replaced the Cartel Commission with the Competition Commission (Wettbewerbskommission, Weko), completed the shift from a regime that tolerated cartels as long as they were not abused to a regime based on a presumption against hard-core price agreements.³ The Weko would soon be asked to review the largest merger in Swiss banking history.

A new exchange

The end of the cartel coincided with the modernisation of the market infrastructure. On 17 May 1995 the stock exchanges of Basel, Geneva and Zurich merged to form the Swiss Exchange (SWX).⁴ Electronic trading replaced the open outcry on the Zurich floor, while the regional exchanges of Basel and Geneva lost their separate existence. The integration of trading in one electronic system strengthened Zurich, where the new exchange had its seat and where the big banks concentrated their trading desks. It also completed a development that had begun with SOFFEX. Swiss securities trading was now a matter of screens, systems and capital, which meant that it favoured the big banks as owners of the largest systems and the most capital.

The combination of domestic deregulation and technical modernisation changed the economics of banking. Commissions that had been fixed by convention came under pressure. Institutional investors, whose importance grew with the expansion of occupational pension funds after the Occupational Pensions Act of 1985, demanded lower fees and better execution. The profitability of the traditional domestic business declined just when the real-estate crisis required heavy provisions. For the management of the big banks this double pressure on margins and capital made the search for new revenues urgent. International investment banking and asset management promised both. The strategies that the three leading banks pursued in the following years were answers to the same question, although they arrived at different answers.

Notes

1. Swiss Federal Supreme Court, BGE 117 Ib 481, judgment of 25 October 1991, as cited above, facts and considerations. ↩
2. BGE 117 Ib 481, as cited above. ↩
3. Federal Act of 6 October 1995 on Cartels and other Restraints of Competition (Cartel Act, KG), SR 251, bilingual edition, https://www.droit-bilingue.ch/en-de/2/25/251-preamble-2.html. The entry into force on 1 July 1996 and the replacement of the Cartel Commission by the Competition Commission are documented in Année politique Suisse, dossier “Kartellgesetz”, https://anneepolitique.swiss/dossiers/649-dossier-kartellgesetz.pdf. ↩
4. SIX Group, “30 years at a glance”, as cited above. ↩

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.