Banking supervision in Switzerland: history, scandals and reforms (cross-border guide)

Context

In a nutshell

• The banking law came into force on 1 March 1935.
• On 4 June 1965 the Federal Council dismissed Max Hommel from the CFB.
• 73% of voters rejected a regulatory initiative in 1984.

Key facts

• What: Evolution of banking supervision and financial scandals.
• When: From 1935 to the present, with a focus on 1965, 1977 and 1984.
• Where: Switzerland, with international impact.
• Who: CFB, Finma, BNS, SBS, UBS.
• Amount: 3 billion francs of support in 1977.

The history of Swiss banking supervision is a tormented one, marked by a constant tension between the need for strict controls and the influence of the financial lobby. The regulatory framework took its first steps after the economic crisis of the 1930s, driven by the bankruptcy of the Banque de Genève in 1931 and the difficulties of the Swiss People's Bank. On March 1, 1935, the Federal Law on Banks and Savings Banks came into force, giving rise to the Federal Commission of Banks (CFB), an independent body in charge of monitoring the liquidity and own funds of institutions.

The first institutional scandals

Trust in the supervisory authority was put to the test as early as the 1960s. On 4 June 1965, the Federal Council decided to dismiss Max Hommel, President of the CFB, with immediate effect. The accusation was serious: Hommel had provided paid advice to companies linked to the Spanish financier Julio Muñoz, involved in the

Operational details

Swiss regulatory developments have often encountered considerable internal resistance, reflecting a political culture that has long debated the appropriateness of stringent state regulation. An emblematic example of this opposition was recorded in May 1984, when a popular initiative aimed at imposing stricter controls on the sector was rejected by the electoral body with 73% of "no" votes. This result has consolidated, for decades, an approach based on self-regulation or targeted interventions only in cases of systemic emergency, rather than on constant proactive and sanctioning supervision.

The comparison between past and present

The current parliamentary debate on the new competences to be attributed to Finma proposes the same historical fractures. While the government intends to endow the authority with modern powers, such as the power to impose fines and to make public the name of defaulted institutions, Parliament shows a prudence that has its roots in 1916, the year in which the first bill remained stuck in the drawers for almost twentyyears. The fundamental difference today lies in the overall weight of the Swiss financial centre. If in the past the Trujillo banking scandal or the 1977 crisis were matters managed internally with discretion, the collapse of Credit Suisse has highlighted how the absence of immediate pressure tools prevents Finma from acting with the necessary timeliness.

Useful planning tools

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Key points

For those who work or live in Switzerland, understanding the dynamics of banking supervision is not just an exercise in economic history, but a way to assess the stability of one's savings and the pension system. Swiss banks, operating in an evolving supervision context, remain the pillars of savings management, including funds linked to the second pillar (LPP) or the third pillar 3a. The stability of the system, guaranteed ultimately by BNS and the State, is the prerequisite for the security of retail deposits.

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Source: swissinfo.ch