Swiss Private Bankers Association

In Basel, the Reformation of 1521 brought large numbers of refugees to the city, where they grew prosperous from the silk trade. This development turned Basel into a main centre of banking and finance.[4]

The history of private bankers in Geneva started around 1550, with the influx of Huguenots fleeing persecution in France[3] shortly after the city of Calvin proclaimed itself a Republic. These Protestant refugees were members of the merchant class and were equipped with substantial wealth, commercial and financial know-how, and personal connections in all the main European cities. Present in every international market, over time they built up a unique expertise in bills of exchange, precious metals and credits.[4] 'This created favourable conditions for bankers in Geneva to engage in transactions that were not directly connected to trade, enabling them to further develop their activities beyond their borders'.[5]

Shortly before the French Revolution, Geneva bankers discovered a new area in which 'they would excel from then on':[5] wealth management, which to this day remains a main focus for Swiss private bankers. 'They were often [...] capitalists who invested their own wealth, along with that of their family members or friends'.[6]

Most of the Swiss private banking houses were established around this time, mid-eighteenth century. They were the most influential players in the Swiss banking system.[7] The defining characteristic of their legal structure was the unlimited liability of partners.

The pioneers included :

• In Geneva: Lombard, Odier & Cie (1796), Pictet & Cie (1805), Mirabaud & Cie (1819), Bordier & Cie (1844), Gonet & Cie (1845), Pivot & Cie (renamed Mourgue d’Algue in 1976), and Darier & Cie (1880);
• In Lausanne: Landolt & Cie (1780) and Hentsch Chollet & Cie (1882);
• In Basel: La Roche & Co. (1787), Sarasin & Cie (1841) and E. Gutzwiller & Cie (1886);
• In Bern: Marcuard & Cie (1750);
• In St Gallen: Wegelin & Co (1741);
• In Zurich: Rahn Bodmer Co. (1750).[3][4][5][8]

However, private bankers were unable to meet the increasing need for finance brought about by the rapid development of industry in the second half of the 19th century. It was around this time that their first rivals appeared, in the form of credit banks structured as limited liability companies. In Geneva, during the last quarter of the 19th century, 'competition intensified due to the establishment [...] of the first foreign banks'[5] followed, in the early 20th century, by large Swiss banks.[9]

To bolster their position in relation to competitors of a new kind, private bankers created the first permanent banking syndicates, which can be seen as the ancestors of the Swiss Private Bankers Association: the Quatuor (1840) and the Omnium (1849), followed by Union financière de Genève (1890), which remained active until December 2013 under the name Groupement des Banquiers Privés Genevois.[5]

In Basel, where the sector emerges much later than in Geneva, around the mid-19th century, Private bankers were responsible for founding the Swiss Bank Corporation (which merged with UBS in 1998). Indeed, Basel private bankers created two separate banking syndicates, the Bankverein and the Kleiner Bankverein. The former set up the Basler Bankverein, the ancestor of SBC, in 1872, while the latter founded the Basler Handelsbank, purchased by SBC in 1945.[4][9]

Max Ernst Bodmer, first Chairman of the Association (1934)

Minutes of the Swiss Private Bankers Association's founding meeting (1934)

The Swiss Private Bankers Association was founded in Bern, on 29 November 1934, following the adoption of the new Federal Act on Banks and Savings Banks on 8 November 1934. The law recognised the special status of private bankers but also suggested ‘closer collaboration’ amongst them.[2] The aim of the association was to represent ‘the professional interests of private bankers’. Forty-eight banks applied to become members.[1] Its first Chairman was Max Ernst Bodmer.

With two World Wars, the Stock Market Crash of 1929 and the Great Depression, the first half of the 20th century was a difficult period for private bankers.[7] However, the end of the Second World War allowed private bankers to grow more vigorously than ever before and to position themselves as ‘the recognised specialists in wealth management’.[7] Several factors contributed to their success: the fact that Switzerland had remained outside the conflicts that ravaged the rest of Europe, ‘the country's exceptional political stability’,[10] the acceleration of banking and financial disintermediation in the 1980s and 1990s, the globalisation and deregulation of financial markets, and the liberalisation of capital flows.[11] These developments boosted wealth management.[12][13]

The second half of the 20th century was, somewhat paradoxically, also a time of consolidation for the private banking sector. According to Swiss National Bank statistics, there were 81 private bankers in Switzerland at the end of 1941, but only 17 in 2000.[14] This consolidation took three different forms:

First, several private bankers, such as Ehinger & Co. in Basel or Ferrier Lullin & Cie in Geneva, were acquired by large Swiss banking groups. Second, some private bankers changed their legal structure, becoming listed or unlisted limited liability companies mainly to resolve succession issues or as a way of financing their growth, such as Julius Baer & Cie in 1975, Vontobel in 1984 and Sarasin in 1986.[15] Third, some private bankers simply disappeared, such as the Geneva bank Leclerc & Cie, which closed in 1977, or the St. Gallen-based bank Wegelin & Co., which was forced to sell most of its operations to Raiffeisen Group in 2012 following a tax-evasion dispute opposing the United States authorities to many Swiss banks.[16][17]

Despite this consolidation, a new private bank was established during this period. Reichmuth & Co in Luzern was founded in 1996[18] and joined the Swiss Private Bankers Association in 2003.