The Zürcher Kantonalbank today: law, governance and supervision

The constitutional and statutory basis

The current constitution of the canton of Zurich, adopted on 27 February 2005 and in force since 1 January 2006, contains in Article 109 the sentence: “Der Kanton betreibt eine Kantonalbank.”¹ The canton operates a cantonal bank. The constitutional duty that the democrats wrote into the constitution of 1869 thus survives in the constitution of the twenty-first century. The bank’s detailed statute is the Gesetz über die Zürcher Kantonalbank of 28 September 1997, in force since 1 January 1998, which has been amended many times since.²

The statute defines the bank as an independent institution of cantonal law with its seat in Zurich: “Die Zürcher Kantonalbank ist eine selbstständige Anstalt des kantonalen Rechts mit Sitz in Zürich.” Its performance mandate provides that the bank contributes to the fulfilment of the economic and social tasks of the canton, supports environmentally sustainable development and takes particular account of the financing needs of small and medium-sized enterprises, employees, agriculture and public bodies. It also promotes home ownership and affordable housing. The capital consists of endowment capital provided by the state.³ Read beside the law of 1869, the mandate shows both continuity and change. The farmers and craftsmen of the founding law have become small and medium-sized enterprises, employees and agriculture. The affordable housing clause continues the interwar co-operative lending, and environmental sustainability has been added as a new objective.

Governance and political control

The organs of the bank are the Bankrat, the Bankpräsidium, the Generaldirektion and the auditor. The Bankrat today has eleven members, including the three members of the Bankpräsidium, all elected by the Kantonsrat for terms of four years, with a maximum tenure of twelve years and retirement at seventy. The Bankpräsidium consists of three full-time members who supervise the business closely and approve large credits. The Generaldirektion runs the bank’s operations. The Kantonsrat exercises supreme supervision through its Aufsichtskommission über die wirtschaftlichen Unternehmen and also elects the external auditor.⁴ The line from the nine-member Bankrat of 1869, elected by the Kantonsrat for three years, to the eleven-member Bankrat of today is direct.

Parliamentary control has real consequences. In 2006 and 2007 the bank became embroiled in an affair over its role as issuer of options that were used in hostile takeover campaigns against listed Swiss companies, among them Unaxis, Saurer, Converium, Ascom, Implenia and Sulzer. The affair exposed weaknesses in internal controls and led to the resignation of the chief executive, Hans F. Vögeli, on 31 May 2007.⁵ The episode showed the tension inherent in the model: a state bank competing in investment banking can find itself in positions that its political owner regards as incompatible with its public mission.

The debate of April 2014 illustrates the same tension from the side of capital. After its designation as systemically important in 2013, the bank asked the Kantonsrat for an increase in its endowment capital of two billion francs. On 14 April 2014 the Kantonsrat granted only 500 million francs, raising the ceiling for the endowment capital from 2.5 to 3.0 billion francs. It abolished the bank’s ability to issue participation certificates, which closed the door to private capital, and restricted the opening of foreign branches to cases where service from Switzerland would breach local law. Parliament also required the bank to avoid disproportionate risks, refused higher remuneration for the leadership and sent back a proposed annual fee of 20 million francs for the state guarantee for reconsideration. The bank’s president, Jörg Müller-Ganz, commented that the bank now knew what its owner wanted.⁶ Swiss radio summarised the position on the bank’s 150th anniversary: the canton owns the bank entirely, the cantonal parliament supervises it, and the citizens have the last word on any change of its statute.⁷

The state guarantee and its compensation

The state guarantee of 1869 survives in substance. In the bank’s current description, the canton of Zurich is liable for all liabilities of the bank except subordinated ones if the bank’s own funds are insufficient.⁸ The 2005 version of the statute expressed it in words that echo the law of 1869 almost verbatim: “Der Staat haftet für alle Verbindlichkeiten der Bank, soweit ihre eigenen Mittel nicht ausreichen.” It excluded subordinated liabilities and participation capital from the guarantee.⁹ The exclusion of subordinated debt matters today, because it allows the bank to issue loss-absorbing instruments that creditors know will not be covered by the canton.

Since 2015 the bank has paid the canton an annual compensation for the guarantee, on the basis of a regulation of the Kantonsrat of 27 November 2014, in force since 1 January 2015.¹⁰ For 2025 the bank paid 34 million francs under this heading, as part of a total distribution of a record 581 million francs to the canton and the communes. The communes received 175 million francs. The canton received 406 million francs, a figure that included the compensation for the guarantee and 169 million francs attributable to the OECD minimum tax.¹¹ The distribution follows the principle of the statute that, after interest on the endowment capital, the remaining distributable profit goes two-thirds to the canton and one-third to the communes in proportion to their population.¹² Critics have described the compensation as circular, since the insurer and the insured are ultimately the same public owner.¹³

The guarantee also has a market value that shows itself in the bank’s ratings. The Zürcher Kantonalbank holds AAA or Aaa ratings from all three major rating agencies.¹⁴ Without the guarantee, its stand-alone rating would be lower, according to an analysis of its 2025 results by the online publication Die Tribüne, which gives AA+.¹⁵ The difference between the two ratings translates into lower funding costs, which is the economic advantage that critics of the guarantee regard as a distortion of competition.

The debate over the state guarantees of cantonal banks is a long-running feature of Swiss banking policy. Peter V. Kunz, professor of commercial law at the University of Bern, argued in 2018 that the guarantees bring serious financial risks for the cantons and distort competition. He recorded that 21 of the 24 cantonal banks enjoyed a state guarantee, that 18 of them paid their cantons for it, and that the cantonal banks distributed 1.4 billion francs to the cantons in 2016, of which 140 million francs were compensation for guarantees. He noted that Bern, Geneva and Vaud had abolished or limited their guarantees after the property crisis and called for the abolition of all state guarantees.¹⁶ Zurich has not followed that advice. Swiss radio noted in 2020 that the guarantee had remained unchanged since the foundation despite repeated discussions of partial or full privatisation.¹⁷ The political reason is simple: any abolition would require a change of the statute, which would be subject to a popular vote. The voters of Zurich have never shown any wish to weaken a bank they regard as their own.

Federal supervision and Article 3a of the Banking Act

Since 1999 the Zürcher Kantonalbank has been subject to federal prudential supervision on the same basis as any other bank, today by FINMA, which took over the functions of the Federal Banking Commission in 2009. The federal definition of a cantonal bank is found in Article 3a of the Banking Act: “Als Kantonalbank gilt eine Bank, die aufgrund eines kantonalen gesetzlichen Erlasses als Anstalt oder Aktiengesellschaft errichtet wird. Der Kanton muss an der Bank eine Beteiligung von mehr als einem Drittel des Kapitals halten und über mehr als einen Drittel der Stimmen verfügen. Er kann für deren Verbindlichkeiten die vollumfängliche oder teilweise Haftung übernehmen.”¹⁸ A cantonal bank is thus a bank established by a cantonal statute, either as a public-law institution or as a company limited by shares, in which the canton holds more than a third of the capital and of the votes. The canton may, but need not, assume full or partial liability for its obligations.

The federal definition is deliberately open. It accommodates the Zürcher Kantonalbank, an independent public-law institution wholly owned by the canton and backed by an unlimited guarantee, alongside cantonal banks organised as listed companies with private minority shareholders and limited or no guarantees. The consequence for the Zürcher Kantonalbank is a double layer of control. FINMA supervises its solvency, liquidity, risk management and conduct under federal law, relying on the audit firm for the supervisory audit. The Kantonsrat exercises ownership control under cantonal law. The two layers have different objectives. FINMA protects creditors and the stability of the system. The Kantonsrat protects the canton’s interests as owner and guarantor and ensures compliance with the performance mandate.

Systemic importance

On 11 November 2013 the Swiss National Bank designated the Zürcher Kantonalbank as a systemically important bank. It was the first bank outside the two big banks to receive that designation, which had been given to UBS and Credit Suisse in 2012. Raiffeisen followed in 2014 and PostFinance in 2015.¹⁹ The designation rests on the too-big-to-fail provisions of the Banking Act, under which the SNB, after consulting FINMA, identifies the banks whose failure would seriously damage the Swiss economy and financial system.²⁰ At the time of the designation the bank reported a capital ratio of 14.9 per cent of risk-weighted assets, against a new required range of 14 to 19 per cent. The vice-chairman of the Bankrat, Janos Blum, declared that the bank had matched every rise in regulatory requirements so far.²¹

The designation had two consequences. The first was a higher capital requirement, which led directly to the request for additional endowment capital that the Kantonsrat scaled back in April 2014. The second was the obligation to prepare an emergency plan showing how the bank’s systemically important functions, above all its payment, deposit and lending functions in the canton, could be maintained if it became insolvent. That obligation raised a question specific to a state-guaranteed bank. FINMA’s resolution report of 2022 described the canton of Zurich as the sole owner of the bank and as liable for all its non-subordinated liabilities if its own resources proved insufficient. The canton would therefore be the primary source of funds to recapitalise the bank in a crisis. The report added that the bank’s existing loss-absorbing instruments fell short of the gone-concern requirements for recapitalisation, and that its emergency plan had not yet been approved as ready for implementation.²²

The bank closed the gap in 2023. After an amendment to the banking legislation allowed it to issue bail-in bonds, it placed about 1.5 billion francs of such instruments during that year and built up the full gone-concern funds without recourse to transitional provisions. On 26 March 2024 the bank announced that FINMA had assessed its emergency plan as implementable. At the end of 2023 its TLAC ratio stood at 26.8 per cent.²³ The legal construction is remarkable. The bank now holds instruments designed to absorb losses before the canton’s guarantee is called upon, which reduces the risk that the guarantee will ever be used. The subordinated instruments sit outside the guarantee, exactly as the statute provides. In a sense, the too-big-to-fail regime has added a layer of private loss absorption between the bank’s equity and the public purse, a layer that the democrats of 1869 did not foresee but that serves their purpose of protecting the canton.

For 2025 the bank reported a common equity tier 1 ratio of 21.2 per cent, more than double the requirement of 9.5 per cent.²⁴ The collapse of Credit Suisse and its takeover by UBS in 2023, treated in Part F, sharpened attention to the domestic systemically important banks. With one of the two big banks gone, the Zürcher Kantonalbank, Raiffeisen and PostFinance have acquired greater weight in the domestic system. The debate on the reform of the too-big-to-fail regime concerns them too, although the principal focus of legislative work has been UBS.

Size and business today

The contrast between the institution of 1870, with its ten employees in the Feldhof, and the bank of today is extreme. In 2025 the Zürcher Kantonalbank reported a balance sheet total of 206.2 billion francs, mortgage loans of 111.2 billion francs, assets under management of 498.6 billion francs and a pre-tax group profit of 1,422 million francs. Income from commission and service business reached a record 1,082 million francs. The chief executive is Urs Baumann.²⁵ By balance sheet the bank was the fourth-largest bank in Switzerland at the time of its 150th anniversary in 2020 and the largest of the cantonal banks by a wide margin.²⁶ Around half of the residents and companies of the canton maintain accounts with it.²⁷

The business mix has changed with the size. Since the reorganisation of the 1990s the bank has built up asset management, trading and capital markets activities that place it in competition with the large private banks. In 2014 it acquired the fund company Swisscanto, which at the time managed some 42.1 billion francs in more than 120 funds.²⁸ The bank also owns a subsidiary in Austria, Zürcher Kantonalbank Österreich AG in Salzburg, and holds stakes in Swiss payment infrastructure companies such as Viseca and TWINT.²⁹ Its activities abroad remain constrained by the owner’s instruction of 2014 to avoid disproportionate risks and to give priority to the needs of the canton.

The expansion into wealth management brought the bank into the cross-border tax conflicts that engulfed the Swiss financial centre after 2008. On 13 August 2018 the United States Attorney for the Southern District of New York announced that the Zürcher Kantonalbank had entered into a deferred prosecution agreement and would pay 98.5 million dollars. The bank admitted to a conspiracy to help US taxpayers evade their tax obligations, principally between 2002 and 2009, through some 2,000 undeclared accounts that held about 794 million dollars at their peak in 2008. Two of its bankers pleaded guilty.³⁰ The case is instructive, because it shows that the state guarantee and the public mandate offered no protection against the extraterritorial reach of foreign criminal law once the bank had entered the international private banking market. The episode belongs to the history of the end of banking secrecy for foreign clients, which is treated in a later part of this book. In the logic of this chapter, it marks the point at which the bank of the democrats had become fully part of the international financial centre that the democrats had once opposed.

Notes

1. Verfassung des Kantons Zürich of 27 February 2005, Art. 109, LS 101, via LexFind, https://www.lexfind.ch/tolv/240047/de. ↩
2. Kanton Zürich, Zürcher Gesetzessammlung, “Gesetz über die Zürcher Kantonalbank (Kantonalbankgesetz)”, LS 951.1, https://www.zh.ch/de/politik-staat/gesetze-beschluesse/gesetzessammlung/zhlex-ls/erlass-951_1-1997_09_28-1998_01_01-108.html. The page lists numerous amendments, among them the reform of 30 June 2003 on supervision, management and remuneration, in force since 1 January 2005, and an amendment of 16 April 2007. ↩
3. Gesetz über die Zürcher Kantonalbank, LS 951.1, version in force on 1 October 2005, §§ 1, 2 and 4, https://www.notes.zh.ch/appl/zhlex_r.nsf/WebView/2FC9598837286EF0C12570830032D36F/$File/951.1_28.9.97_50.pdf. The wording quoted is from this version, and later amendments may have changed details. The 2005 version also allowed participation certificates up to half of the endowment capital. The Kantonsrat removed that possibility in 2014. ↩
4. Zürcher Kantonalbank, “Corporate Governance”, https://www.zkb.ch/de/ueber-uns/unser-unternehmen/corporate-governance.html. The 2005 version of the statute still provided for a Bankrat of thirteen members: LS 951.1, version of 1 October 2005, § 15 (cited above). ↩
5. Wikipedia (German), “Zürcher Kantonalbank”, section on the derivatives affair (cited above). Wikipedia notes that the Federal Banking Commission investigation of October 2008 cleared the then members of the board. ↩
6. Swissinfo (SDA), “Zürcher Kantonsrat nimmt seine Staatsbank an die kurze Leine”, 14 April 2014, https://www.swissinfo.ch/ger/zuercher-kantonsrat-nimmt-seine-staatsbank-an-die-kurze-leine/38381916. The ceiling increase is recorded in the Beschluss des Kantonsrates über die Erhöhung des Dotationskapital-Rahmens der Zürcher Kantonalbank von 2,5 Mrd. Franken auf 3,0 Mrd. Franken, 14 April 2014, https://www.zh.ch/de/politik-staat/gesetze-beschluesse/gesetzessammlung/zhlex-os/erlass-951_101-69-287.html. ↩
7. SRF, “150 Jahre Zürcher Kantonalbank – ‘Die Bürger aus den Händen der Kapitalisten retten’” (cited above). ↩
8. Zürcher Kantonalbank, “Staatsgarantie der Zürcher Kantonalbank”, https://www.zkb.ch/de/hilfe/sc/was-bedeutet-die-staatsgarantie-.html. The bank states its equity at about CHF 15.7 billion at the end of 2025. ↩
9. LS 951.1, version of 1 October 2005, § 6 (cited above). ↩
10. Kanton Zürich, “Reglement über die Entschädigung der Staatsgarantie durch die Zürcher Kantonalbank”, LS 951.14, 27 November 2014, https://www.zh.ch/de/politik-staat/gesetze-beschluesse/gesetzessammlung/zhlex-os/erlass-951_14-70-303.html. ↩
11. Zürcher Kantonalbank, media release “Jahresergebnis 2025” (cited above). ↩
12. LS 951.1, version of 1 October 2005, § 26 (cited above). ↩
13. Wikipedia (German), “Zürcher Kantonalbank”, section on the compensation for the state guarantee (cited above). ↩
14. Zürcher Kantonalbank, media release “Jahresergebnis 2025” (cited above). ↩
15. Die Tribüne, “Zürcher Kantonalbank (ZKB): Rekordhohe Ausschüttung für Kanton und Gemeinden (CHF 581 Mio)”, 2026, https://www.die-tribuene.ch/zuercher-kantonalbank-zkb-rekordhohe-ausschuettung-fuer-kanton-und-gemeinden-chf-581-mio-klumpen-handels-und-hypothekarrisiken-bleiben/. Wikipedia gives a stand-alone rating of “aa”, without date. ↩
16. Peter V. Kunz, “Heikle Garantien für Kantonalbanken”, Die Volkswirtschaft, April 2018, https://dievolkswirtschaft.ch/de/2018/04/kunz-05-2018/. ↩
17. SRF, “150 Jahre Zürcher Kantonalbank – ‘Die Bürger aus den Händen der Kapitalisten retten’” (cited above). ↩
18. Bundesgesetz über die Banken und Sparkassen (Bankengesetz, BankG) of 8 November 1934, SR 952.0, Art. 3a, text as consolidated on LexFind, https://www.lexfind.ch/tolv/141675/de. The consolidated text consulted is the version of 1 January 2009. Article 3a has not been changed in substance since. ↩
19. Swiss National Bank, “Financial stability”, https://www.snb.ch/en/the-snb/mandates-goals/financial-stability, listing the SNB decrees on systemic importance. ↩
20. Art. 8 para. 3 BankG, introduced by the amendment of 30 September 2011 (Stärkung der Stabilität im Finanzsektor; too big to fail), in force since 1 March 2012: AS 2012 811, https://www.fedlex.admin.ch/filestore/fedlex.data.admin.ch/eli/oc/2012/126/de/pdf-a/fedlex-data-admin-ch-eli-oc-2012-126-de-pdf-a.pdf (“Die Schweizerische Nationalbank (Nationalbank) bezeichnet nach Anhörung der FINMA durch Verfügung die systemrelevanten Banken und deren systemrelevante Funktionen.”). ↩
21. Swissinfo, “Zurich cantonal bank branded too big to fail”, 11 November 2013, https://www.swissinfo.ch/eng/business/zurich-cantonal-bank-branded-too-big-to-fail/37304920, for the date of the designation, the capital figures and Blum’s statement. ↩
22. FINMA, Resolution Report 2022, “Focus on domestic systemically important banks”, https://www.finma.ch/en/enforcement/recovery-und-resolution-n/publikationen/resolution-report/archive/resolution-report/focus-on-domestic-systemically-important-banks/. The report states the position as at the end of 2021. ↩
23. Zürcher Kantonalbank, media release “FINMA beurteilt den Notfallplan der Zürcher Kantonalbank als umsetzbar”, 26 March 2024, https://www.zkb.ch/de/ueber-uns/medien/medienmitteilungen/2024/zkb-notfallplan-finma-umsetzbar.html. ↩
24. Zürcher Kantonalbank, media release “Jahresergebnis 2025” (cited above). ↩
25. Zürcher Kantonalbank, media release “Jahresergebnis 2025” (cited above). ↩
26. SRF, “150 Jahre Zürcher Kantonalbank – ‘Die Bürger aus den Händen der Kapitalisten retten’” (cited above). The HLS noted that in 2005 the bank’s assets of 86 billion francs were some fifty times those of the smallest cantonal banks: Froidevaux, “Banche cantonali”, DSS (cited above). ↩
27. SRF, “Es war alles ein wenig improvisiert” (cited above). ↩
28. Zürcher Kantonalbank, “Geschichte”, company profile (cited above), and “Geschichte: Die nahe Bank seit über 150 Jahren” (cited above), entry for 2014. ↩
29. Wikipedia (German), “Zürcher Kantonalbank”, section on subsidiaries and holdings (cited above). ↩
30. United States Attorney’s Office, Southern District of New York, “Manhattan U.S. Attorney Announces Criminal Charges Against Zürcher Kantonalbank”, 13 August 2018, https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-criminal-charges-against-z-rcher-kantonalbank. ↩

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.