The Swiss National Bank, the First World War and the interwar crisis — overview and summary
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Anyone who walks from Paradeplatz down Börsenstrasse towards the lake passes a sober neoclassical building with a stone façade, tall windows and no advertising of any kind. The house at Börsenstrasse 15 is the Zurich seat of the Swiss National Bank. From here the Governing Board steers the monetary policy of the country, sets the policy rate, intervenes in the foreign exchange market when it judges this necessary and manages one of the largest central bank balance sheets in the world relative to national output. The bank’s postal address is in Zurich, although its legal and administrative seat has been in Bern since the day it opened.1 This division is an inheritance of the political bargain that created the bank in 1905. It also tells a story about the place of Zurich in the Swiss financial system during the first half of the twentieth century, when the city became the operational centre of Swiss money.
This chapter follows the Swiss National Bank from the constitutional amendment of 1891 through the failed attempt to create a pure state bank in 1897 and the compromise of the National Bank Act of 1905 to the opening of the bank on 20 June 1907. It then turns to the First World War, when mobilisation, the collapse of the international gold standard and the financing of the federal deficit forced the young institution into a role that its founders had not foreseen. The inflation of the war years and the social tensions it produced led to the general strike of November 1918, in which Zurich was the political and military focal point. The chapter continues with the 1920s, when Switzerland returned to its pre-war gold parity, the franc acquired the reputation of a hard currency and foreign capital, much of it in flight, made Zurich an international financial centre. It closes with the banking crisis of the 1930s, the frozen German credits of 1931, the losses of several big banks, the federal rescue of the Schweizerische Volksbank in 1933, the long deflation and the devaluation of September 1936.
The perspectives of this book meet closely in this period. The historian finds in it the first great test of a federal state that had only recently acquired the institutions of a modern monetary system. The lawyer sees the construction of a central bank as a joint-stock company under special federal law, with private and cantonal shareholders, a monopoly of note issue and a statutory duty to maintain convertibility, together with the emergency law by which the Federal Council suspended, restored and again suspended that duty. For the practitioner, the interwar decades are the period in which the reputation of the Swiss franc as a safe haven, the habit of foreign clients to hold assets in Zurich and the recurrent dilemma between exchange rate stability and domestic employment were formed. The Banking Act of 1934 and banking secrecy, which grew directly out of the crisis described here, are the subject of the following chapter (F.II). The Second World War, the gold transactions of the Swiss National Bank with the Reichsbank and the Bergier reports belong to chapter F.III.
Notes
- Swiss National Bank, “The SNB as a joint-stock company”, https://www.snb.ch/en/the-snb/organisation/snb-joint-stock-company. The page gives the bank’s offices in Bern and Zurich, the postal address at Börsenstrasse 15 in Zurich and the opening date of 20 June 1907. ↩
Conclusion
The Swiss National Bank was born of a compromise. After the constitutional amendment of 1891 had given the Confederation a monopoly of note issue, the voters rejected a pure state bank in 1897, and only the joint-stock construction of 1905, with its cantonal and private shareholders and its divided seat, made a central bank possible. When it opened on 20 June 1907, the bank took over a note issue previously shared by thirty-six banks and committed itself to the gold standard of the Latin Monetary Union. Its legal seat was in Bern, while its Governing Board sat in Zurich, where the money market, the big banks and the stock exchange were located. That arrangement reflected the political reality of a federal state and the economic reality of a country whose financial activity had concentrated in one city.
The First World War tested the young institution far beyond anything its founders had imagined. Convertibility was suspended, small notes had to be issued, and the national bank financed a considerable part of the federal deficit by discounting treasury bills. The Confederation raised war loans and introduced its first direct federal taxes, a war profits tax and stamp duties that survive in modified form today. Prices roughly doubled, real wages fell and the resulting social tension broke out in the strike of the Zurich bank clerks in September 1918 and in the general strike of November 1918, in which Zurich was the military and political focal point. The demands of the Olten committee were rejected in November 1918 but largely realised in the following decades, from proportional representation in 1919 to old-age insurance in 1948.
In the 1920s the national bank restored the pre-war gold parity, making the Swiss franc a hard currency in a continent of inflation. Foreign capital, much of it in flight from France, Germany, Italy and Austria, flowed into Swiss banks, and Zurich rose in little more than a decade to the rank of an international financial centre. Much of that money was lent on to Germany, and when the German banking system collapsed in 1931 and the standstill agreements froze Swiss claims, several big banks suffered losses from which they did not recover. The Diskontbank in Geneva failed in 1934, the Volksbank was rescued by the Confederation in 1933 and Bank Leu, the Basler Handelsbank, the Eidgenössische Bank and the Bankgesellschaft had to be reorganised. The national bank and the Federal Council defended the gold parity until September 1936, at the cost of years of deflation and high unemployment, before a devaluation of about 30 per cent brought relief.
The period left Zurich with institutions and a reputation that still define it: an independent central bank directed from Börsenstrasse, a currency that the world regards as a safe haven, a banking system shaped by concentration after crisis and a legal framework for banking created in the wake of the crash. The following chapter examines the most famous and most controversial part of that framework, the Banking Act of 1934 and banking secrecy.
In five sentences
1. After the constitutional amendment of 1891 and the failed state bank of 1897, the National Bank Act of 1905 created the Swiss National Bank as a joint-stock company with cantonal and private shareholders, a legal seat in Bern and its Governing Board in Zurich, and the bank opened on 20 June 1907.
2. In the First World War the bank suspended convertibility, issued small notes and financed part of the federal deficit, while the Confederation raised war loans and introduced its first direct federal taxes and stamp duties.
3. Wartime inflation halved the value of money in four years, cut real wages and led to the Zurich bank clerks’ strike of September 1918 and the general strike of November 1918, whose demands shaped Swiss social policy for decades.
4. In the 1920s the franc returned to its pre-war gold parity and became a hard currency, flight capital from neighbouring countries made Zurich an international financial centre, and much of that money was lent to Germany.
5. The German standstill of 1931 caused heavy losses to the big banks, forced the federal rescue of the Volksbank in 1933 and prepared the Banking Act of 1934, while the long defence of the gold parity ended with the devaluation of about 30 per cent in September 1936.
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.