In the course of their history, Swiss banks have become a myth, an integral part of the image of a ‘small, wealthy and clean country’. The so-called ‘Gnomes of Zurich’ represent in the eyes of international public opinion a financial centre, which plays a prominent role in the worldwide capital market, gold business and the global currency system: a role that transcends the capacities of a small state in the field of foreign policy. In spite of an unparalleled series of scandals which have erupted since the 1970s, the growth potential of the financial sector seems to be undiminished.

The international role of the Swiss banks, in comparison with the size of the country, must be the starting point in any analysis of the position of finance and financiers in the Swiss economy, society and politics. Has this international impact been translated into a position of overwhelming power within the domestic economy? Is the power of the banks a genuine one or is it merely a reflection of a more original predominance of the industrial capital, of the large industrial firms which are the backbone of the export-orientated Swiss economy? What are the repercussions of the strength of the financial sector on the position of the financial elites in Swiss society? How can we define and measure the power of banks?

This chapter examines these questions. The first section deals with the tradition of Swiss banking and the genesis of the modern financial sector up to 1880.