Historical Sketch

At the turn from the 13th to 14th century rural communities concluded an alliance for protection, which more communities adhered to during the 14th century, including cities like Lucerne, Zurich and Berne. The system of alliances and treaties expanded throughout the Middle Ages. The Swiss Diet was instituted in the 15th century for the alignment of the member states, which remained fully sovereign. During a period of military supremacy in Central Europe, the Swiss Confederation attained de facto independence from the Holy Roman Empire in 1499, which was formalized in the 1648 Peace of Westphalia. In 1798, Napoleonic France conquered the Swiss Confederation and established the centralized Helvetian Republic as a satellite government. The internal differences between the former confederate states led to the collapse of the new state within a few years. In 1803, a new order was established by Napoleon, as "mediator", in which the Cantons, as the former states were now called after the French model, regained full sovereignty under a weak central government. After Napoleon's fall in 1815, the constitution was remodelled with an even weaker central power. The territories of Geneva, Neuchâtel and Valais which were annexed by France were re-integrated. The liberal movement of the 1830s advocated a state with a stronger central government and gradually gained power in many Cantons. After a short civil war against the conservative Cantons, Switzerland was established as a federal state 1848 with a careful balance between central and Cantonal powers.

Monetary History Overview

In the pre-Napoleonic Confederacy coinage and accounting existed only on level of the member states, no common monetary order ever existed. The Helvetian Republic was the first to attempt this with the law of March 1799, which adopted the bimetallic coinage standard of Berne as the Helvetian Franc for the new country. But the government did not have the means to issue the new coinage in sufficient amounts, let alone to withdraw the circulating older and foreign coins. In 1803 constitution returned the exclusive coinage authority to the Cantons. By resolution of the Swiss Diet in 1804, however, a common coinage standard was adopted with the 1st Swiss Franc as bimetallic currency in a standard close to the Helvetian one. In 1810, the gold weights were adjusted minimally. The 1815 constitution did not foresee any common monetary standard at all. In July 1819, the Swiss Diet resolved to keep the Franc as common standard with a slightly revised gold-to-silver ratio, now identical to the French one. The Cantons of Saint Gall and Grisons did not ratify. Geneva, having joined only in 1815 did never adopt the Swiss currency of 1804 and kept its own accounting until 1852, which was based on the Genevan Florin and, since 1838, on the Genevan Franc. The issuance of specie coins had ceased everywhere in the early 1810s, but subsidiary coins proliferated to the point of increasing the monetary confusion that existed already as many old and foreign coins were circulating freely. In 1824, the Swiss Diet resolved to stop the further issuance of low-valued subsidiary coins, which 16 Cantons indeed ratified, but over-issuance continued everywhere. Two years later, six western Cantons signed a convention to revise the subsidiary coinage. For once, the reform could be implemented, while everywhere else the confusing monetary situation continued. The 1848 constitution established the sole issuance power of the central government, the Cantons finally lost their privilege. Two years later, in May 1850, the 2nd Swiss Franc was created as the currency unit in the French silver standard. The variety of circulating old and foreign coins were withdrawn and demonetized until mid-1852. In 1860, French gold coins were admitted as legal tender, turning the Franc into a bimetallic currency, Swiss gold coins were issued since the late 1880s. In 1865, Switzerland became one of the founding members of the Latin Monetary Union, by which more foreign coins flew into the country. Paper money issuance by several commercial banks had begun in the mid-1820s but remained scarce and concentrated in the larger cities. The 1850 monetary reform did not extend to paper money. In 1882 finally, the free banking approach to paper money ended, and the issuance got regulated by introducing rules for the issuing banks and a common banknote design. In 1907, the Swiss National Bank was established and obtained the exclusive issuance privilege for paper money. The private banknotes were demonetized until mid-1910. During the economic depression during and after World War I, Switzerland temporarily issued state paper money to secure availability. During the time, however, Switzerland was one of the few countries not to formally suspend the gold standard, although convertibility of paper money was restricted until 1929. The economic crisis of the 1930s triggered a devaluation of the Franc. In 1936, the gold parity was reduced by 30% with a fluctuation margin of about ±12.5%, the parity band was abandoned in 1952. In 1971, the Franc got up-valued against gold, and two years later, the exchange rate was floated. Since then, the Franc has gradually appreciated against all other major currencies.

Switzerland joined the International Monetary Fund (IMF) on 29.05.1992.

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