The Kantonalbank law of 1869 and the opening of the bank

The popular vote of 7 November 1869

The law that gave the bank its legal form was drafted in the summer and autumn of 1869 and submitted to the people under the new constitution. The official collection of Zurich laws records it as the “Gesetz betreffend die Zürcher Kantonalbank”, dated 7 November 1869, the day of the popular vote, which the text of the collection calls the “7. Wintermonat 1869”. The law was accepted with 37,157 votes out of 48,001 voters.¹ A majority of more than three-quarters was a clear verdict, all the more so since the constitution itself had passed with about 61 per cent seven months earlier. Many voters who had hesitated over the political reforms evidently had no difficulty with a bank that promised them cheaper credit. The Zürcher Kantonalbank’s own account of its history dates the adoption of the law to the autumn of 1869 and the opening to 15 February 1870.²

The law was short. Its brevity reflected a legislative style that the democrats shared with the liberals they had defeated: the Federal Coinage Act of 1850 had been a model of economy (see Part C), and the bank law of 1869 followed the same tradition. In some thirty paragraphs it defined the purpose of the bank, its capital, the guarantee of the state, the types of business it could conduct, the limits on its lending, its organs and the use of its profits.

Purpose, capital and state guarantee

The first paragraph set out the purpose in a single sentence: “Die Kantonalbank hat den Zweck, nach Maaßgabe ihrer Mittel, den Kantonseinwohnern die Befriedigung ihrer Kredit- und Geldbedürfnisse zu erleichtern.” The bank was to make it easier for the inhabitants of the canton, within the limits of its means, to satisfy their needs for credit and money. The law gave particular attention to small and medium landowners, craftsmen and trades. The second paragraph provided that the founding capital, to be raised by the state, would for the time being amount to six million francs, with the possibility of increase. The third paragraph contained the provision that has defined the Zürcher Kantonalbank ever since: “Der Staat haftet hinter den eigenen Mitteln der Bank für alle Verbindlichkeiten derselben.”³ The state was liable for all the obligations of the bank behind the bank’s own resources.

These three sentences deserve a lawyer’s attention, because they contain the whole model in compressed form. The purpose clause made the bank an instrument of public policy with a defined clientele, the inhabitants of the canton, and a defined function, the satisfaction of their credit and money needs. The phrase “nach Maaßgabe ihrer Mittel” limited that function by the bank’s own resources, which meant that the bank was expected to operate on sound commercial lines. The capital was provided by the state, which made the canton the sole owner. The guarantee was subsidiary: creditors had first recourse to the assets of the bank and only then to the state. It was also unlimited in amount and covered all obligations without distinction. A saver who deposited his money with the Kantonalbank therefore had the whole taxing power of the canton behind his claim, which no private bank could offer.

Business lines and limits

The law listed the permitted business. The bank could grant loans secured on real property, buy and sell securities, run a savings bank, discount and collect bills of exchange, open credit lines and lend against pledges. It received the right to issue non-interest-bearing banknotes: “Der Kantonalbank steht das Recht der Emission unverzinslicher Banknoten zu.” Savings deposits were to bear interest from the day of payment and were, as a rule, repayable at any time on demand. Mortgage lending was subject to prudent limits: loans on agricultural land could never exceed three-quarters of its value, and loans on houses and farm buildings no more than two-thirds.⁴

The combination is revealing. The core of the business was mortgage lending and savings, which corresponded to the needs of the democratic clientele. The note issue gave the bank a cheap source of funds and placed it in competition with the existing issuing banks. The rules on loan-to-value ratios show that the democrats intended credit to be granted on sound security. Three-quarters of the value of agricultural land was a generous yet prudent ceiling by the standards of the time. The law thus combined a political purpose with banking prudence. That combination has characterised the Zürcher Kantonalbank throughout its history and explains, more than any other factor, its survival where other cantonal banks failed.

Governance: a bank of the parliament

The law placed the bank under the control of the cantonal parliament. The Bankrat, the supervisory council, consisted of nine members elected by the Kantonsrat for three years. A Bankkommission of three members, elected in the same way, supervised current business more closely. The Kantonsrat also appointed the director.⁵ The profits were to flow initially into the reserve fund.⁶ The model was simple. Once the people had approved the statute, their representatives in parliament elected the men who ran the bank. The government of the canton played a secondary role. In a period when the democrats distrusted executive power concentrated in a few hands, it was logical to subordinate the bank to the legislature, which they controlled.

This parliamentary governance has survived all later reforms. The Bankrat is still elected by the Kantonsrat, which also approves the bank’s annual report and exercises what the current statute calls the “Oberaufsicht”, the supreme supervision. The balance between political control and professional management has been adjusted repeatedly, most recently after the derivatives affair of 2006 and 2007 and in the debates over capital and remuneration in 2014, both discussed below. The basic structure, a bank owned by the canton and governed by a council elected by parliament, remains that of 1869.

The opening on 15 February 1870

The law provided for operations to begin on 1 January 1870.⁷ In practice, the start was delayed by several weeks. According to the NZZ, the recruitment of the leadership proved difficult, and several candidates declined the positions offered to them.⁸ The bank finally opened its doors on 15 February 1870 in the Feldhof near Paradeplatz, with ten employees.⁹ Swiss radio, drawing on the historian Matthias Wiesmann, reports that the first office was located in the former residence of an armoury master, and quotes his judgment that “everything was a little improvised”.¹⁰

On its opening day the bank sent a letter to potential customers announcing the start of business. Signed by the bank president, the director and the cashier, the letter was addressed with some restraint to “unsere Geschäftsfreunde”, our business friends. The bank’s archive had lost this founding document. In January 2020 a German stamp collector presented the original to an adviser at the bank’s Winterthur branch, which allowed the bank to recover it in time for its 150th anniversary.¹¹ The location of the first office is symbolic. The Kantonalbank began its life a few steps from the square where the Kreditanstalt would erect its headquarters in the following years. It has remained in the immediate neighbourhood of the great private banks ever since.¹²

The creation of the Kantonalbank also marked a turning point in the canton’s relationship with the oldest bank in Zurich. Leu & Co., founded in 1755 as the state’s investment commission, had remained connected with the canton after its conversion into a joint-stock company in 1854. According to a history of the bank cited in Part C, the canton sold its holding in Leu when it founded the Kantonalbank.¹³ Whatever the precise terms, the direction is clear. The canton chose to exercise its public banking function through a new institution with a democratic mandate and left the patrician bank of the eighteenth century to the market. The comparison between the two models is taken up in Section IX.

Notes

1. Staatsarchiv des Kantons Zürich, Offizielle Sammlung der Gesetze und Verordnungen (OS), vol. 15, pp. 92–99, “Gesetz betreffend die Zürcher Kantonalbank”, 7 November 1869, https://archives-quickaccess.ch/viewer_pdf/stazh_os/OS%2015%20(S.%2092-99)/pdf_t. The catalogue entry is at https://www.archives-quickaccess.ch/stazh/os/ref/OS+15+(S.+92-99). ↩
2. Zürcher Kantonalbank, “Geschichte: Die nahe Bank seit über 150 Jahren”, https://www.zkb.ch/de/ueber-uns/unser-unternehmen/geschichte.html. ↩
3. OS 15, pp. 92–99, §§ 1–3 (cited above). The summary of the law also gives an authorisation to raise the capital to twelve million francs. ↩
4. OS 15, pp. 92–99, §§ 7, 9, 11 and 14 (cited above). The wording of § 14 reads: “Die Belehnung von landwirthschaftlichen Grundstücken darf nie mehr als ¾, die von Häusern und Oekonomiegebäuden höchstens 2/3 betragen.” ↩
5. OS 15, pp. 92–99, provisions on the organs of the bank (cited above). ↩
6. OS 15, pp. 92–99, § 16 (cited above). ↩
7. OS 15, pp. 92–99, § 29 (cited above). ↩
8. NZZ, “150 Jahre Zürcher Kantonalbank: ZKB, Retterin vor ‘Kapitalisten’” (cited above). ↩
9. Zürcher Kantonalbank, “Geschichte”, company profile, https://unternehmensprofil.zkb.ch/de/geschichte.html. The NZZ locates the first office at the Feldhof near Paradeplatz: NZZ, “150 Jahre Zürcher Kantonalbank” (cited above). ↩
10. SRF, “150 Jahre Zürcher Kantonalbank – ‘Es war alles ein wenig improvisiert’”, 2020, https://www.srf.ch/news/regional/zuerich-schaffhausen/150-jahre-zuercher-kantonalbank-es-war-alles-ein-wenig-improvisiert. ↩
11. Zürcher Kantonalbank, “Unsere Bank – wie alles begann”, https://www.zkb.ch/de/blog/themen/unsere-bank-wie-alles-begann.html, and “Ausstellung ZeitReise: Kundenbrief von 1870”, https://www.zkb.ch/de/blog/themen/kundenbrief-von-1870.html. ↩
12. 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 article dates the Kreditanstalt building on Paradeplatz to 1873–1876. ↩
13. Inside Paradeplatz, “The Big Sleep – die Bank Leu, Teil vier”, 21 January 2019, https://insideparadeplatz.ch/2019/01/21/the-big-sleep-die-bank-leu-teil-vier%EF%BB%BF/ (“Mit ihrer Gründung 1870 verkaufte der Staat sein bis dahin beträchtliches Aktienpaket von Leu und engagierte sich entsprechend bei der ZKB.”). See also Chapter C.II on Leu & Co. ↩

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.