The legacy for the financial centre

A single market and a federal framework

The first legacy of the period is the single economic area. The Constitution of 1848 created, within a few years, a customs union, a unified postal system, a common standard of weights and measures, a common currency and freedom of establishment for most citizens. These are the preconditions of a national capital market. A bank in Zurich could from now on lend to a railway company in Vaud, accept deposits from a manufacturer in St. Gallen or finance a trading house in Basel in the same currency, under the same monetary law and without internal customs barriers to the underlying trade. The national scope of the great Zurich banks founded from 1856 onwards, and later of the Swiss stock exchanges and of insurance companies, would have been unthinkable without this framework.

The federal structure itself became part of the legacy. The Confederation received the powers that required uniformity: customs, coinage, and later note issue and banking supervision. The cantons retained the direct taxes, much of commercial and civil law until the codifications of the late nineteenth and early twentieth centuries, as well as the power to create their own banks. The cantonal banks, of which the Zürcher Kantonalbank of 1870 is the largest, are institutional products of this federal division of power. Their state guarantee remains a distinctive feature of the Swiss banking system in 2026. The practice of compensating the cantons for the loss of revenue, begun with the customs compensation of Article 26 of the 1848 Constitution, continued in the distribution of the profits of the Swiss National Bank. Tax competition between the cantons, a factor in the location decisions of companies and wealthy individuals that every Zurich practitioner encounters, is rooted in the same constitutional arrangement.

A currency defined by law and by metal

The second legacy is the franc itself. The Coinage Act of 1850 defined the currency as a precise weight of silver of stated fineness. The franc was thus from its birth a currency defined by law and anchored in an external standard. Its successive definitions, silver in 1850, bimetallism in 1860 and gold in the twentieth century, preserved this principle until the end of its gold convertibility. Swiss monetary culture has retained a strong preference for rules, stability and the preservation of value. The Swiss constitution still mandates, in its currency article, that the National Bank hold part of its reserves in gold, a provision that reflects this tradition.¹

The Swiss experience in the Latin Monetary Union added a further element to this culture. Switzerland learned that monetary co-operation with larger neighbours could bring advantages and that the quality of a shared currency depends on the discipline of its weakest members. When the union collapsed after the First World War, Switzerland was the member that had preserved the value of its own coins. The franc emerged from the interwar period as one of the currencies that held its gold parity longest, until the devaluation of 1936.² The reputation of the franc as a safe-haven currency, which the Swiss National Bank has had to manage in periods of strong appreciation, has shaped the Swiss financial centre since the twentieth century. It developed over the following century and builds on the institutional foundations laid in 1850: a single currency, a small open economy with sound public finances and a political system that treats monetary stability as a constitutional value. The Zurich museum publication links Zurich’s rise as an international financial centre directly to the stability of the franc.³

Regulation by experience

The third legacy concerns the way in which Swiss financial regulation came into being. The development from the free issue of notes in the 1830s through the concordats of 1864 and 1876, the Banknote Act of 1881, the monopoly article of 1891 and the National Bank Act of 1905 shows a characteristic pattern. Private and cantonal institutions first organised themselves and attempted co-operation among themselves when problems appeared. Once co-operation proved insufficient, federal regulation followed. A central institution was established only after a long democratic debate, which included two popular votes rejecting more radical solutions in 1880 and 1897. The result was a compromise, a central bank organised as a joint-stock company with public and private shareholders and with seats in both Bern and Zurich.

This incremental, consensual approach, which responds to experience and seeks compromise between public and private interests, remains characteristic of Swiss financial regulation. The self-regulation of the Swiss Bankers Association, the role of recognised industry standards in the supervisory practice of FINMA and the long preference for principles-based regulation all fit into this tradition. A practitioner who explains the Swiss regulatory approach to foreign clients will often find that its logic becomes clear only when traced back to the nineteenth century. The country then built its monetary and financial institutions step by step, under the constant scrutiny of cantons and voters.

Zurich’s position

The fourth legacy concerns Zurich’s place among Swiss financial centres. In 1848 Zurich was an industrial and commercial city with a modest banking sector, a gulden-oriented monetary tradition and a leading role in federal politics through Jonas Furrer. By the time the Swiss National Bank opened in 1907, Zurich was the seat of the largest Swiss commercial banks, of the most important cantonal bank and of the governing board of the central bank. The period covered in this chapter created the conditions for this change: the single market, the unified currency, the freedom of establishment and the national scope of banking business. The following part of this book, on Alfred Escher, the railways, the Kreditanstalt, the Federal Polytechnic and the Zurich stock exchange, explains how Zurich used these conditions.

The comparison with Geneva, to which the companion volume is devoted, is instructive. Geneva entered the federal state with a stronger tradition of private banking and closer ties with the Paris money market. Having won the currency debate in the sense that the franc on the French model prevailed, it remained the leading centre for international private wealth management for a long time. Zurich, which had preferred the gulden, adapted rapidly to the new monetary order. Its combination of industrial finance, cantonal banking and joint-stock banking gave it the broader base. The division of labour between the two cities that still characterises the Swiss financial centre, with Geneva strong in private banking and commodity trade finance and Zurich the seat of the major banks, the stock exchange, the insurance industry and the National Bank’s governing board, has one of its roots in the choices made between 1848 and 1852.

Notes

1. Art. 99 para. 3 of the Federal Constitution of 18 April 1999. Swiss National Bank, “Legal framework”, https://www.snb.ch/en/the-snb/organisation/legal-framework, which states that the Constitution requires the SNB to set aside sufficient currency reserves from its earnings and specifies that a part of these reserves be held in gold. ↩
2. HLS, Bernard Degen, “Franken”, http://www.hls-dhs-dss.ch/textes/d/D13671.php. ↩
3. MünzenWoche, “Einleitung ‘Die Zürcher und ihr Geld’ Teil 2”, https://neu.muenzenwoche.de/nationen/einleitung-die-zuercher-und-ihr-geld-teil-2/. ↩

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.