The Federal Act on Banks and Savings Banks of 8 November 1934

From draft to statute

The legislative work began in earnest in 1932 and 1933, under the pressure of the failures just described. Guex found that the very first draft of the banking law, dated February 1933, already contained an article on banking secrecy. The federal authorities had inserted it in response to the demands of the bankers, who in turn supplied extensive comments insisting on criminal penalties for indiscretions. Adolf Jöhr, general manager of the Schweizerische Kreditanstalt and one of the most influential Zurich bankers of the interwar years, had written in January 1932 that it was extremely important that the strictest possible secrecy be preserved and that it would be highly desirable if indiscretions could be punished under criminal law. The head of the Federal Department of Finance, Jean-Marie Musy, had assured the bankers as early as September 1931 that supervision would not weaken secrecy, warning that a flight of the capital deposited in Swiss banks as a result of official supervision would do great damage to the national economy.¹

The Federal Council presented its dispatch to Parliament at the beginning of February 1934.² On banking secrecy it said remarkably little. Vogler observes that the dispatch devoted a grand total of two sentences to the subject, which confirms that the government regarded the secrecy clause as a technical complement to supervision.³ Guex, working from the parliamentary records, reached the same conclusion from a different angle: the article on banking secrecy occasioned no debate and was not modified to any notable degree in the preparliamentary or parliamentary stages. He explains the silence of the left partly by the fear of the Social Democrats that an attack on the secrecy clause would endanger the supervision that they had sought for so long.⁴

Parliament completed its deliberations in the autumn session of 1934. On 8 November 1934 the National Council adopted the Act by 119 votes to one. The Council of States approved it unanimously.⁵ No referendum was requested. The Federal Council put the Act into force on 1 March 1935. The Federal Banking Commission held its constituent meeting in April of that year.⁶ The near-unanimity of the final vote tells its own story. After three decades of failed attempts, the combination of a spectacular rescue, a failed Geneva bank and a draft that the bankers themselves had helped to write produced a consensus that stretched from the Social Democrats to the Liberals.

The content of the Act

The Act of 1934 was a framework law of moderate ambition. The Historical Dictionary of Switzerland lists its main elements as general principles on the authorisation, organisation and management of banks, rules on liquidity and on the ratio of own funds to borrowed funds, the obligation to have the accounts audited by independent audit firms, the introduction of banking secrecy for the protection of the personality rights of clients, and the creation of the Federal Banking Commission.⁷ Each of these elements deserves a brief comment, because together they defined the architecture of Swiss banking supervision until the end of the century.

The scope of the Act extended to banks, private bankers and savings banks. The cantonal banks were included, but with important reservations that respected the responsibility of the cantons that owned and guaranteed them. The balance between federal and cantonal authority in this respect remained a recurring theme of later revisions. Private bankers, the unlimited partnerships of the Geneva and Basel tradition that also had a presence in Zurich, were brought under the same statute as the joint-stock banks, although their personal liability for the debts of the firm had long served as their principal guarantee to clients.

The question of authorisation needs care, because the modern licensing regime is often projected back to 1934. The original Act laid down conditions of organisation and management that a bank had to meet, giving the Federal Banking Commission the power to act against institutions that did not meet them. A comprehensive licensing requirement of the kind that governs Swiss banking today, under which a bank needs a licence from the supervisor before it may start business and its managers must offer the guarantee of irreproachable business conduct, was introduced only by the revision of 11 March 1971.⁸ The current Article 3 states the rule plainly: a bank requires authorisation from the supervisor to commence business and may not be entered in the commercial register before receiving it.⁹

The heart of the Act of 1934 was the external audit. Every bank had to have its annual accounts examined by an audit firm recognised by the Federal Banking Commission, whose auditors had to report on compliance with the Act and to inform the Commission of serious irregularities. This construction, which the Swiss literature calls the dual supervisory system, delegated most of the on-site work to private audit firms and left the Commission with a small staff that supervised the auditors and intervened when their reports revealed problems. It reflected the bankers’ demand of 1931 that supervision should not be exercised by a state administration, while allowing the Confederation to supervise several hundred banks with a secretariat of modest size. The principle survives today: Article 18 of the Banking Act still obliges every bank to appoint an audit firm licensed by the Federal Audit Oversight Authority. The Swiss Financial Market Supervisory Authority, for its part, continues to rely heavily on these firms.¹⁰

The prudential rules were simple by modern standards. The Act required an appropriate ratio between a bank’s own funds and its total liabilities and an appropriate ratio between its liquid assets and its short-term liabilities, leaving the details to an implementing ordinance. It also required banks to publish their annual accounts and, in the case of larger institutions, interim balance sheets, according to a prescribed structure. The obligation to publish was an innovation of lasting importance, because it gave depositors a basis, however limited, for judging the institutions to which they entrusted their money. The Swiss National Bank, which already compiled banking statistics before 1934, obtained through the Act a statutory right to demand annual and interim balance sheets from any bank at any time.¹¹

Two further features of the original Act reflected the specific experience of the crisis. The first was a set of rules on moratoria and compositions for banks in difficulty, which allowed a bank to obtain a deferral of its liabilities under judicial control and to reorganise without immediate bankruptcy. The second was a privilege in bankruptcy for savings deposits up to 5,000 francs, which gave small savers priority over other creditors.¹² Both instruments were designed with the fate of the Volksbank and the Diskontbank in mind. They were intended to avoid a repetition of the disorderly failures of 1933 and 1934 and to protect the depositors whom the Social Democrats claimed to represent.

The Act also contained a provision that is almost forgotten today although it mattered greatly to the Swiss National Bank in the 1930s. Banks that intended to place large loans or investments abroad had to notify the National Bank in advance, which could object if the operation conflicted with the country’s monetary policy or economic interests.¹³ The provision expressed a lesson of the crisis: the German credits that had nearly destroyed several big banks had been granted without any public authority having been asked for its view.

The Federal Banking Commission

The institution that the Act created proved more durable than any of its substantive rules. The Federal Banking Commission was an independent authority composed of members appointed by the Federal Council, administratively attached to the Federal Department of Finance, and assisted by a small secretariat. Its first president was the former Federal Councillor Edmund Schulthess, who had left the government in 1935 and who, as head of the Department of Economic Affairs in 1925, had himself drafted one of the failed banking bills of the 1920s.¹⁴ The appointment of a former member of the government signalled that the new authority was to have weight, and Schulthess’s words at the first meeting show that its founders understood their mission as the preservation of the banking system as much as its control.

The powers of the Commission were initially limited. It could issue instructions, demand information from the banks and their auditors, order the correction of irregularities and, in the last resort, request the withdrawal of a bank’s right to operate. It had no large inspectorate of its own and depended on the reports of the recognised auditors. This limitation was deliberate. It fulfilled the promise made to the bankers in 1931 that supervision would be mild and would not be exercised by the state administration, while keeping the supervisor at a distance from the individual client files that banking secrecy protected. The Commission’s staff and its officers were themselves bound to secrecy, and, as the next section shows, the original Article 47 expressly included observers of the Banking Commission among the persons liable to punishment for breach of professional secrecy. The subsequent history of the Commission, which grew from this modest beginning into one of the most important economic authorities of the country, is traced in section VIII.

Notes

1. Guex, “Origins of the Swiss Banking Secrecy Law” (2000), on the draft of February 1933 and the comments of the Swiss Bankers Association, and quoting Jöhr’s letter of January 1932 and Musy’s statement of September 1931 from the files of the Federal Department of Finance. Guex also quotes the President of the Confederation, Heinrich Häberlin, to the effect that an open or covert lifting of banking secrecy would be fatal. ↩
2. Preamble of the Federal Act on Banks and Savings Banks of 8 November 1934 (SR 952.0), consolidated version of 1 January 2024 on LexFind, https://www.lexfind.ch/tolv/251813/de: “nach Einsicht in eine Botschaft des Bundesrates vom 2. Februar 1934” (BBl 1934 I 171). ↩
3. Vogler, Das Schweizer Bankgeheimnis (2005), p. 26 (“In seiner Botschaft an das Parlament nahm der Bundesrat mit ganzen zwei Sätzen Bezug auf das Bankgeheimnis”). ↩
4. Guex, “Origins of the Swiss Banking Secrecy Law” (2000), p. 244 (“the article dealing with banking secrecy occasioned no debate, nor was it modified to any notable degree”). ↩
5. Vogler, Das Schweizer Bankgeheimnis (2005), p. 27 (“Am 8. November 1934 wurde das Bankengesetz vom Nationalrat mit 119:1 Stimmen … verabschiedet”). ↩
6. Eidgenössische Bankenkommission, Jahresbericht 2008, retrospective on the history of the Commission, p. 18, https://www.finma.ch/de/~/media/finma/dokumente/dokumentencenter/myfinma/finma-publikationen/geschaeftsbericht/jb08_d_ebk.pdf. The last annual report of the Commission recalls its creation in 1935 in the aftermath of the banking crisis and quotes from the inaugural address of its first president in April 1935. ↩
7. Körner and Cassis, “Banken”, HLS (2006), which characterises the federal interventions of the Act as “moderate” and records that the audit was henceforth to be entrusted to independent trust companies (“die Buchprüfung, die fortan unabhängigen Treuhandgesellschaften zu übertragen war”). ↩
8. Federal Act on Banks and Savings Banks (SR 952.0), consolidated version of 1 January 2009 on LexFind, https://www.lexfind.ch/tolv/141675/de, footnote to Art. 3 para. 2 let. c (guarantee of irreproachable business conduct): “Fassung gemäss Ziff. I des BG vom 11. März 1971, in Kraft seit 1. Juli 1971 (AS 1971 808 824 Art. 1; BBl 1970 I 1144)”. On the revision of 11 March 1971, in force 1 July 1971, and the preceding Bundesbeschluss of 21 March 1969 on the licensing requirement for foreign-controlled banks, see BGE 98 Ib 375 (13 October 1972), https://servat.unibe.ch/dfr/bge/b1098375.html. ↩
9. Federal Act on Banks and Savings Banks (Banking Act, BankG) of 8 November 1934, SR 952.0, consolidated version as at 1 January 2023, Article 3 paragraphs 1 and 2 and Article 18 paragraph 1, consulted through a reproduction of the Fedlex text, https://compare.coveredbondlabel.com/download-file/141. ↩
10. Art. 18 para. 1 of the Federal Act on Banks and Savings Banks (SR 952.0), consolidated version of 1 January 2024 on LexFind, https://www.lexfind.ch/tolv/251813/de: banks must appoint an audit firm licensed by the Federal Audit Oversight Authority under Art. 9a para. 1 of the Audit Oversight Act of 16 December 2005 to carry out an audit under Art. 24 of the Financial Market Supervision Act of 22 June 2007 (FINMASA, SR 956.1). ↩
11. Swiss National Bank, annual report for 1934, p. 6, stating that the National Bank “befugt ist, jederzeit und von jeder Bank Jahresbilanzen und besonders Zwischenbilanzen zu verlangen” and that banks must give it information on their balance sheets on request, and p. 18, citing the “Bankstatistik 1933”, https://www.snb.ch/dam/jcr:f8ca1781-057d-491b-a082-cad9cc804656/annrep_1934_komplett.de.pdf. ↩
12. Swiss National Bank, annual report for 1934 (above), p. 18, stating that the Banking Act protects Swiss savings “indem die Spareinlagen bis zum Betrage von fünftausend Franken ein Konkursvorrecht vor den gewöhnlichen Forderungen” enjoy; Federal Supreme Court, BGE 100 III 67, on the bank moratorium (Bankenstundung) under Article 32 BankG in its version before 2004, which had the same effects as the ordinary composition moratorium, https://servat.unibe.ch/dfr/bge/c3100067.html. The deposit protection system was extensively revised in 2004. ↩
13. Swiss National Bank, annual report for 1934 (above), p. 5, on the duty of banks under the Federal Act on Banks and Savings Banks of 8 November 1934 to inform the National Bank before concluding or participating in certain defined foreign transactions, and on its power to object “mit Rücksicht auf die Landeswährung, die Gestaltung des Zinsfusses auf dem Geld- und Kapitalmarkt oder die wirtschaftlichen Landesinteressen”. Articles 7 to 9 BankG were repealed by Annex no. II 5 of the National Bank Act of 3 October 2003 with effect from 1 May 2004, as the consolidated version of 27 December 2006 on LexFind shows, https://www.lexfind.ch/tolv/141673/de. ↩
14. Eidgenössische Bankenkommission, Jahresbericht 2008, p. 18, naming Federal Councillor Schulthess as first president of the Commission and quoting from his inaugural address: the task would not be easy, and the Commission would have to try with all its strength to preserve the Swiss banking system. On the 1925 proposal see Vogler, Das Schweizer Bankgeheimnis (2005), p. 14. ↩

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.