The universal bank as the Swiss model

What made the Swiss big bank “universal”

The term “universal bank” describes an institution that combines, within one legal entity, the collection of deposits and savings, the granting of short- and long-term credit to commerce and industry, the issuing and placing of securities, trading in securities on its own account and for clients, and the management of investors’ assets. The comparative economic history of banking has long distinguished this continental form from the specialised structure that developed in Britain, where deposit banks, merchant banks and stockbrokers remained separate. The economic historian Alexander Gerschenkron made the German universal bank the centrepiece of his argument that countries industrialising late relied on large banks to supply the capital that early industrialisers had raised through other channels.¹ Nils Herger, in his account of the Swiss big banks, places the Swiss institutions in the same comparative frame and treats the French crédit mobilier and the American investment banks as parallel responses to the capital needs of industrialisation.²

The Swiss big banks developed into universal banks through a process of accumulation. The Kreditanstalt began as an issuing and financing house on the crédit mobilier pattern, with commercial credit as a second leg. After the losses of the 1860s it strengthened its commercial credit business and reduced its direct industrial participations. From the late 1870s it moved its industrial and international participations into separate financing companies. From the 1890s it served a growing public of private investors with information and custody. From 1905 it collected deposits and served clients through a national network of branches. By 1914 it combined all the functions listed above. Each step responded to a concrete problem or opportunity, and no legislator prescribed the resulting form. The characteristic Swiss universal bank was therefore a product of business practice under a liberal legal regime, a regime that imposed no separation between deposit and investment banking and no specific supervision of banks other than issuing banks until 1934.

The Swiss form differed from the German in two respects that became important later. The first was the weight of international business. A small country with a large capital surplus, as Switzerland had become by the end of the nineteenth century, could not employ all its savings at home. The big banks of Zurich and Basel therefore acted from an early stage as channels for the export of Swiss capital, through foreign issues, financing companies such as the Orientbank and Elektrobank, and the placement of foreign securities with Swiss investors. The second was the weight of asset management. The Swiss universal bank served a large public of domestic and later foreign investors whose wealth it held in custody and managed, a function that grew in the twentieth century into the private banking and wealth management for which Zurich became known worldwide. Neither function was dominant before 1914. Both were present in embryo in the Kreditanstalt of the 1890s and 1900s.

The duality of the Swiss banking system

The universal bank never became the only form of Swiss banking. As section V showed, the democratic movement of the 1860s created the cantonal banks as a counter-model. The private bankers, savings banks, regional banks and cooperative credit institutions meanwhile continued alongside the big banks. The Swiss banking system that emerged before 1914 was therefore a system of coexistence between a small number of large universal banks, concentrated in Zurich and Basel, and a broad layer of regional institutions with public or cooperative ownership and a domestic mandate. This structure is still recognisable today. The cantonal banks, the Raiffeisen group, the regional banks and the private banks have survived the disappearance of four of the five big banks of the twentieth century, while the single remaining universal bank, UBS, has absorbed the institutions that once competed with it.

The duality also shaped the relationship between banks and the state. The cantonal banks were public institutions with state guarantees, created by democratic decision to serve the local economy. The big banks were private companies, created by liberal entrepreneurs to serve the capital needs of railways, industry and investors, operating without public guarantees. In the crisis of 2008 and again in 2023, the question of whether the state stood behind the big banks became the central problem of Swiss financial policy. The historical answer of the founding period was clear: the Kreditanstalt had no state guarantee and needed none, because its size was modest relative to the Swiss economy. By the early twenty-first century, the balance sheets of the two surviving big banks had grown to several times Swiss gross domestic product. The implicit guarantee that their size implied had become a political and legal problem of the first order. That problem, and the regulation of systemically important banks that responded to it, belongs to Part G.

Comparison with Geneva and Basel

The companion volume on Geneva shows that the city of Calvin developed a different financial profile. After Geneva’s crédit mobilier experiment of 1853 had failed, the city’s strength remained in private banking and in the management of foreign fortunes by partnerships with unlimited liability. Basel combined private bankers with joint-stock banks and became the seat of the Schweizerischer Bankverein, whose rivalry with the Zurich banks lasted until 1998. Zurich became the city of the big banks because the Kreditanstalt succeeded where the Geneva bank had failed and because the railway, industrial and insurance cluster that grew around it gave the city a critical mass of financial activity that no other Swiss city could match. The distribution of roles established between 1856 and 1914, with Zurich as the seat of the big banks and insurers, Geneva as the home of private banking and Basel as a centre of both, continued into the twentieth century and still marks the Swiss financial centre today.

Notes

1. Alexander Gerschenkron, Economic Backwardness in Historical Perspective: A Book of Essays (Cambridge, Mass.: Belknap Press of Harvard University Press, 1962). Bibliographical details and a summary of the thesis, including the more active role of large banks in supplying capital and entrepreneurship in backward economies such as Germany, from “Alexander Gerschenkron”, Wikipedia (English), https://en.wikipedia.org/wiki/Alexander_Gerschenkron. ↩
2. Herger, “Railway Boom, the Big Banks, and the Ascent of Zurich as Financial Centre (1848–1914)” (cited above), abstract. ↩

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.