Money and Credit


The table section of this chapter begins with summaries of coin production, note circulation, currency reserves of issuing banks, and money supplies. There are two estimates of the development of the money supply, one of which covers the period 1851–1910, and the other, the period 1907–1954. The first estimate is a contribution by Willi Brammertz and Thomas Brouwer to the National Fund project “Money supply and economic growth in Switzerland 1851–1913” (“Geldmenge und Wirtschaftswachstum in der Schweiz 1851–1913”); the second comes from Christoph Grüebler. Two additional tables contain information on the clearinghouse activities of the Swiss National Bank (“Schweizerische Nationalbank” / “Banque nationale suisse”) and its balance sheets items and financials since the first year of its operation. The core of the chapter, however, is the main banking statistic. We start with balance sheet and value added estimates by Franz Ritzmann and Peter Püntener, which cover the periods 1800–1965 and 1850–1913; balance sheets and operational financials of the earlier note issue banks (1826–1910); and the major groups of banks in the 20th century (1906–1992). After that, we cover the distribution of savings deposits, deposit and checking accounts, medium-term bonds and mortgages according to interest rate, and the savings and mortgage situation in the cantons. Two two-page spreads show the short-, medium- and long-term interest rate changes in the period 1830–1992. Financial markets activity can be examined in our tables back until the advanced 1920s through the monthly statistics of the Swiss stock index and the Zurich and Basle stock exchange volumes. Exchange rate statistics of Switzerland – where we need to differentiate between fixed exchange rates set by monetary agreements with individual countries, average annual exchange rates for demand deposits, and clearing rates – extends even farther back, until well before the world wars. The chapter concludes with a table on the level of mortgage indebtedness in the cantons between 1913 and 1969.

Money Supply Statistics 1851–1990

The money supply consists of means of payment domestically held by private non-banks (i. e. excluding the Federal Government). There is a differentiation between three aggregates called M1, M2, and M3. M1 is equal to the sum of all cash (notes and coins) in circulation, postal checking account balances, and domestic sight deposits at commercial banks; M2 consists of M1 plus callable investments, and M3 consists of M2 plus domestic savings, deposits, and salary accounts. Those three money supply aggregates are balanced against the so-called monetary basis, the note bank money supply consisting of commercial banks’ cash and sight deposits held by the National Bank. The monetary basis is the currency made available to the economy by the National Bank.
The fact that comprehensive banking statistics exist only since the formation of the Swiss National Bank in 1907 explains why the money supply estimate of Brammertz and Brouwer is of a much more hypothetical nature than that of Grüebler. Reliable data on the development of the money supply was passed on from the 19th century only with regard to note circulation, which was reconstructed by Walter Adolf Jöhr, the Swiss National Bank’s first president, in his groundbreaking review of Swiss note banks between 1826 and 1910. Brammertz and Brouwer were able to use Jöhr’s figures in unchanged form. Their estimates of cash supplies and sight deposits, by contrast, required substantial research of their own. For the coin supply, the above- mentioned authors familiarized themselves with Jakob Speiser’s contemporary estimate of “means of circulation” for the year 1849 and then conjectured that Swiss coin circulation in the following decades evolved identical to that of the entire Latin Mint Union, which, in addition to Switzerland, included France, Italy, Belgium and after 1868 Greece. While the total number of coins circulating in the Latin Mint Union is known, it must be considered that the currencies of the member nations were allowed to freely circulate within the entire union, making it impossible to determine how many coins were in circulation in a given country at a given time. When considering the great importance of coins in the 19th century, one cannot help but feel that this represents a major weakness of the estimate by Brammertz and Brouwer. Unfortunately, there was no alternative way to estimate the money supply of the second half of the 19th century.
A precise determination of the money supply in Switzerland is not possible before 1922 when the Latin Mint Union, which had been in a state of partial disassembly since 1893, was formally discontinued, so that subsequently only Swiss coins were accepted as legal tender. One can, however, assume with certainty that coins no longer played a major role in the early 20th century. Grüebler therefore refrained from a summary estimate of the coin amount and calculated a reduced money supply series for the years 1907–1921 instead. Starting with 1922, he was able to consider all components of the money supply, but until the mid-1930s he was still missing data on the division of current accounts in sight and temporary deposits. He was therefore forced to use a constant coefficient for the first part of his estimates. His estimate series thus contain three sections of varying quality.
For a long time, the Swiss National Bank was hesitant about performing its own money supply estimates. The supplement to the monthly report No. 8 of the year 1975, which dealt with the revision of money supply statistics, finally presented series extending backwards to the year 1950. The figures printed in the table section of this chapter for later years originate from the ongoing publications of the Swiss National Bank. (For the changes in determining money supply calculations in the last 20 years, see the chapter “Statistics of monetary values and institutions”, authored by Christoph Menzel in the Introduction to Economy and Social Statistics of Switzerland by P. Bohley and A. Jans.)

Banking Statistics 1800–1992

Based on operating reports, anniversary essays, the savings account statistics of the years 1852–1918, the Swiss Financial Yearbook, the banking statistics of the years 1935–1965, and a series of bank monographs prepared for the Swiss National Exposition of 1914 in Berne, Franz Ritzmann performed a balance sheet estimate of Swiss banks within his historical-statistical-theoretical review of the Swiss banking industry. He employed a classification system commonly used in the years 1935–1970 where canton banks, major banks, mortgage banks, other local banks, savings banks, and “other” banks were treated as separate banking groups. By applying this system also onto the 19th and early 20th centuries, and by consolidating branch office financials for canton and major banks, Ritzmann arrived at estimates for the years 1907–1934 that often substantially deviated from the official statistics. For canton and major banks, Ritzmann took the balance sheet totals directly from anniversary essays and annual reports of the individual banks. Estimating the balance sheet totals of local and savings banks required far more effort. Ritzmann began by determining the number of banking institutions and their balance sheet totals in all 25 cantons for the years 1852, 1862, 1872, 1882, 1896, 1908, 1918, 1935, 1945, and 1955. He then applied his banking group classification system to the data. In a third step he interpolated and extrapolated the core values of his estimate – computed as described above – via sample series. The samples each contained a banking set whose annual reports covered an extended period of time. For the years in which Ritzmann determined the balance sheet totals of all banks, the portion of samples of the grand total equaled between 79% (1955) and 100% (1852) for mortgage banks, between 78% (1945) and 99% (1852) for other local banks, and between 37% (1862) and 46% (1896) for savings banks. After 1956, Ritzmann was able to use official statistics for all banks.
Peter Püntener is responsible for the value added statistics for the years 1850–1913. His estimates, representing a contribution to the National Fund project “Money supply and economic growth in Switzerland 1851–1913” (“Geldmenge und Wirtschaftswachstum in der Schweiz 1851–1913”), are based on the review of the annual reports of 34 banks. In order to form value added series, Püntener used the following values: balance sheet totals, gross value added from interest differential transactions, and non-differential business (commissions, fees, exchange profits, etc.) as well as intermediate consumption (provisions, fees for services used, expenditures for rent, fixtures, etc.). Based on Ritzmann’s classification system, Püntener first calculated the gross production value for each bank group by adding the value added from non-interest differential transactions and the balance from interest differential transactions (active interest minus passive interest). After that, he applied the results to the balance sheet totals of those institutions included in the samples and multiplied the quotients by the overall balance sheet totals computed by Ritzmann for individual banking groups. For savings bank, where this procedure proved inapplicable, Püntener used the fact that their debits were largely identical with savings deposits, and that those were invested mostly in mortgages. This allowed him to estimate the gross production value of savings institutions through the multiplication of balance sheet totals by the average interest difference between savings and first mortgages. Based on samples, he assumed intermediate consumption to be five percent of the gross production value for all banking groups.
The official banking statistics printed in the table section of this chapter originate without exception from the three main publications of the Swiss National Bank: the “Statistical Handbook of the Swiss Money and Capital Market” (“Statistisches Handbuch des schweizerischen Geld- und Kapitalmarktes” / “Manuel statistique du marché financier suisse”) from the year 1944; the “Swiss Banking” series that went as far back as 1907; and the monthly reports of the years 1951–1993. Those seeking to see these statistics in a larger context, one which shows the evolution of overall money and credit activities, should avail themselves of “The Swiss Economy 1946–1986 – Data, Facts, Analyses”, a volume published in commemoration of the 125th anniversary of the Swiss Bank Union, which contains an informative chapter on the structure and meaning of the “Financial market Switzerland” and the Swiss banking industry.

Exchange Rates 1875–1992

Before World War I, to ensure a solid foundation of currency parity, currencies were generally defined by the value of a certain amount of gold (gold standard). The political-economic changes generated towards the end of World War I caused this system to break down. After the gold standard had been restored one more time during the 1920s, the Great Depression of the 1930s sounded its final death knell. Several countries devalued their currencies, including, on September 27, 1936, Switzerland. While lead currencies US Dollar and Pound Sterling temporarily freed themselves entirely from gold, fascist Italy and national-socialist Germany introduced the national foreign exchange control, where so-called predetermined payment traffic with payment and clearing rates replaced the formerly free payment traffic. During World War II, this form of payment, where mutual credits were posted at contractually agreed on rates between countries, became common throughout Europe.
At the end of the year 1946, the first parities of the International Currency Fund came into effect and thus initiated a new system of fixed exchange rates. Based on its gold parity, valid since 1936, Switzerland was able to seamlessly merge into this system without having to join the International Currency Fund or the other Bretton-Woods institutions. The 1957/58 year-end brought yet another currency-political event when Western Europe returned to free convertibility by passing the European Currency Accord. The Bretton-Woods system came under increasing pressure in the early 1970s, and was abandoned entirely in 1973. Since then, the exchange rates of foreign currencies against the Swiss Franc are no longer officially determined. Within the European Community, the so-called European Currency System allows only minor room for fluctuations between the currencies of member nations.
The legal frameworks, the international developments, and the rate politics of the Swiss currency officials in the decades after World War II are elucidated in an essay on the Swiss money and currency politics by Franz Ritzmann in the above-mentioned Swiss Bank Union anniversary volume.

SOURCE: «Money and Credit» in Ritzmann/Siegenthaler, Historical Statistics of Switzerland, Zürich: Chronos, 1996, 795-800

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The current chapter contains 31 table(s) between 1800 and 2012