The legacy for the Zurich financial centre

Two global banks at the Paradeplatz

The most visible legacy of the 1990s was the constellation that dominated the Zurich financial centre for a quarter of a century: two global banks, UBS and Credit Suisse, with their head offices at the Paradeplatz and the Bahnhofstrasse. At the end of 2007 the Swiss National Bank’s statistics still counted two big banks, twenty-four cantonal banks and seventy-six regional and savings banks.¹ Reduced from five to two within a decade, the category of big banks remained unchanged until 2023. The two banks shaped the labour market of the city, its real-estate market, its tax revenues and its image abroad. They financed its cultural institutions and sponsored its sporting events. When foreigners spoke of the “Swiss banks”, they usually meant these two.

This concentration had clear advantages. Zurich possessed two institutions capable of competing with the largest American and European banks in wealth management, investment banking and asset management. They attracted international talent to the city, supported a dense ecosystem of lawyers, auditors, consultants and technology providers and gave the Swiss franc capital market a depth that a country of its size could not otherwise have achieved. The concentration of wealth management in two global groups also helped Switzerland to maintain its position as the leading centre for cross-border private banking at the beginning of the twenty-first century. The Historical Dictionary estimates that the assets managed in Switzerland reached more than ten times gross domestic product by the middle of the 2000s and that Swiss institutions managed about a third of the world’s cross-border private wealth at the beginning of the century.²

Concentration risk

The concentration also had a price, which became apparent only later. With two banks that together accounted for about two-thirds of the aggregate balance sheet of Swiss banks, the country depended on the health of two institutions whose business was increasingly determined by investment banking in New York and London. The losses of 1998 on LTCM and in Russia were a first warning. The losses of 2001 and 2002 after the technology boom were a second. In both cases the banks absorbed the losses from their own resources. The third test came in 2007 and 2008, when UBS lost more than any other European bank on American mortgage securities and needed the support of the Confederation and the National Bank. The fourth came in March 2023, when Credit Suisse lost the confidence of its clients and was taken over by UBS with the support of the federal authorities. These events are the subject of the second and fifth chapters of this Part.

In each of these crises the Swiss authorities faced the problem that the consolidation of the 1990s had created. Two banks had become too large and too interconnected to fail, but they were also too large for the Swiss state to rescue without great risk. The expert commission on “too big to fail” that the Federal Council appointed in November 2009 under Peter Siegenthaler rejected the break-up of the banks and direct limits on their size. It recommended stricter capital and liquidity requirements and special rules for systemically important banks.³ After the takeover of Credit Suisse in 2023 only one of the two banks remains. The concentration risk that the mergers of the 1990s created has thus taken its most extreme form: a single global bank whose balance sheet is a multiple of Swiss economic output. The reforms discussed in the last chapter of this Part are the latest attempt to manage this legacy.

Culture and reputation

The consolidation also left a cultural legacy. The merged banks imported the culture of Anglo-American investment banking into Zurich. That culture brought professionalism, quantitative risk management, global reach and a meritocratic style of leadership that broke with the hierarchies of the old Swiss banks. It also brought a remuneration system that rewarded short-term revenues, a tolerance for complex products and a distance between the top management and the traditional clientele. The tension between the Swiss private banking tradition of discretion, stability and long-term relationships and the investment banking culture of transactions, trading and bonuses ran through both groups until 2023. It remains a question for UBS today.

For the reputation of Zurich, the consolidation had ambivalent effects. On the one hand, the city became the home of two banks that ranked among the largest in the world, so that the name Zurich stood for financial power in a way that it had not done before. On the other hand, the concentration of so much risk in two institutions meant that their failures were perceived as failures of the Swiss financial centre as a whole. The dormant accounts affair, the LTCM losses, the crises of 2008 and 2023 and the conflicts over banking secrecy were all associated with the Paradeplatz. Geneva, whose financial centre rests on a larger number of private banks and foreign institutions and on commodity trading finance, has been less exposed to this concentration, as the companion volume on Geneva shows. The difference illustrates a basic choice that the Zurich financial centre made in the 1990s without ever deciding it explicitly.

Notes

1. Swiss National Bank, “Banks in Switzerland 2007”, Zurich 2008, https://www.snb.ch/public/asset/en/www-snb-ch/publications/statistical-publications/banks-in-switzerland/2008/banks_2007/publications0_en/banks_2007.en.pdf. ↩
2. HLS, “Finanzplatz”, as cited above. ↩
3. SWI swissinfo.ch, “Seilziehen um ‘Too big to fail’-Banken-Problematik”, 2010, https://www.swissinfo.ch/ger/finanzplatz-schweiz/seilziehen-um-too-big-to-fail-banken-problematik/8730408. ↩

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.