Trade Centuries in Switzerland
Located in the centre of Europe, with access to important Alpine passages, many countries in common, and the Rhine, Switzerland acquired a significant role as a trading centre in the Middle Ages.
Foreign investors came to the flourishing Geneva trade fairs, which took place in the 15th century. Centuries were an important part of the mediaeval trade scene in Europe. Youssef Cassis, a professor of economic history at the European Institute of Higher Education in Tuscany, explained that Switzerland had made its banking sector heavily dependent on foreign merchants and financial experts.
In the 17th century, Switzerland was a significant haven for Protestant refugees from the Catholic neighbouring countries, which also contributed to the growth of the banking sector. Not only watchmakers came to Switzerland due to the influx of emigrants, but also banking professionals and other skilled workers.
According to Cassis, all banks in Europe and Switzerland were originally trading companies specialising in financing trade transactions, but when banking became an independent profession, they merged together. Private banking evolved from the traditional world of private bankers, who are defined as private-owned corporations and assume unlimited liability for losses.
Elevate Your Wealth Game: Empowering UHNWIs for Simplified Asset Management. Altoo Platform Preview
Banking and Swiss Neutrality
As the companies in Geneva, Basel, and later the textile giants in St. Gallen grew, they needed financial experts who cared about loans, currencies, and early derivatives to offset trading risks.
Due to this success, some of the most famous names in the Swiss private banking industry were later founded, including Lombard Odier Darier Hentsch (1796), Pictet (1805), Mirabaud (1819), and Bordier. (1844).
The 1815 recognition of Switzerland’s political neutrality and the establishment of the modern federal state following the Civil War in 1847 helped establish a robust wealth management sector.
The old reactionary monarchies that surrounded Switzerland, in the opinion of Swiss economic historian Robert Vogler, provided the ideal political and economic environment for the secure storage of assets. However, the severe political and economic unrest of the 20th century had an impact on Switzerland. Established at the forefront of international private banking. The assets were drawn to Switzerland like a magnet by two world wars, the Cold War, financial crises, and the instability of many other currencies.
The anchoring of banking secrecy in national law between the world wars and Switzerland’s attractiveness for large amounts of money, which could not be realised due to European restrictions on foreign exchange between the countries, were the reasons for the increase in Swiss asset management. The stability and exchangeability of the Swiss franc into other currencies during times of economic volatility around the world have also increased Switzerland’s appeal as a location for asset management.
Challenges of the 21st Century
After the record year of 2021, the assets managed by private banks in Switzerland in 2022 fell by 361 billion Swiss francs, from about 3.3 to about 2.9 trillion Swiss Francs, which corresponds to a decrease of about 11%. This is due to a decline in net new money and, in particular, to poor performance in financial markets due to increased geopolitical and macroeconomic uncertainty.
