Union Bank of Switzerland (UBS) was a Swiss investment bank and financial services company located in Switzerland. The bank, which at the time was the second largest bank in Switzerland, merged with Swiss Bank Corporation in 1998 to become UBS. This merger formed what was then the largest bank in Europe and the second largest bank in the world.
UBS was formed in 1912 through the merger of the Bank in Winterthur and Toggenburger Bank, both founded in the early 1860s. UBS then continued to grow through acquisitions, including Aargauische Kreditanstalt in 1919, in 1945, Interhandel Basel in 1967, Phillips & Drew in 1986, and Schröder, Münchmeyer, Hengst & Co. in 1997 among others.
The historical UBS logo comprises the initials "UBS" horizontally, crossed by vertical "SBG", referring to the name of the bank in German, "Schweizerische Bankgesellschaft". "UBS" ceased to be considered a representational abbreviation for the Union Bank of Switzerland after the bank's 1998 merger with Swiss Bank Corporation and is today considered a standalone brand.
History
Origins of the Union Bank of Switzerland
In 1862, The Bank in Winterthur was founded in Winterthur, Switzerland, with an initial share capital of CHF5 million.UBS History. Company website.UBS AG. Funding Universe, Retrieved 10 August 2010. The Bank in Winterthur operated primarily as a commercial bank, providing financing for a range of companies and projects. The bank would be involved in funding the Swiss Locomotive and Machine Works, the hotel Baur au Lac in Zürich and many other companies. The bank capitalized on its location at an important Swiss railroad junction and its large warehousing facilities allowed the bank to take advantage of the dramatic rise in cotton prices caused by the American Civil War. The Bank in Winterthur saw its share capital double by the end of the war.Swiss banking: an analytical history. Palgrave Macmillan, 1998 (p. 132-136).
Meanwhile, in 1863, the Toggenburger Bank was founded in Lichtensteig, Switzerland with an initial share capital of CHF1.5 million. The Toggenburger Bank was a savings and mortgage bank for individual customers with a branch office network in Eastern Switzerland.Handbook on the History of European Banks. Edward Elgar Publishing, 1994. In 1882, Toggenburger Bank opened a branch in St. Gallen in eastern Switzerland and began to shift its operations there through the end of the 19th century.
The Union Bank of Switzerland was formed in 1912 when the Bank in Winterthur merged with the Toggenburger Bank. The combined bank had total assets of CHF202 million and a total shareholders' equity of CHF46 million. This combination was part of a larger trend toward concentration in the banking sector in Switzerland at the time. Through the next few years, the bank would begin to shift its operations to Zürich from its historical headquarters in the cities of Winterthur and St. Gallen, Switzerland. In 1917, UBS completed construction of a new headquarters, Münzhof, in Zürich's Bahnhofstrasse, considered to be the Wall Street of Switzerland.
The new bank used different names in its three core languages: German, French and English. In German, the bank was Schweizerische Bankgesellschaft and was known by the initials SBG. The original English name for the combined bank was the Swiss Banking Association, but it was later changed to Union Bank of Switzerland in 1921 to mirror the French form of the name: Union de Banques Suisses. The bank's logo, introduced in 1966, would later reflect both the German SBG and the English and French name UBS.
UBS acquired a number of banks in its first decade as a combined bank and expanded its branch network, establishing representation throughout Switzerland by 1923. UBS acquired a controlling interest in Aargauische Creditanstalt in 1913 and Banque Ch. Masson & Cie. in 1916. Although the bank suffered during World War I and the postwar economic crises in Europe, UBS continued to make acquisitions after the conclusion of World War I. The bank purchased the remaining stake in Aargauische Creditanstalt in 1919 that it had not acquired in 1913. Also in 1919, the bank acquired Commandit-AG Weibel & Cie. in Fleurier and William Cuénod & Cie. In 1920, UBS acquired Banca Svizzera-Americana with branches in Locarno and Lugano; Unionbank Geneva and Banque Henry Rieckel & Cie., based in La Chaux-de-Fonds. Three years later, in 1923, UBS acquired the Schweizerische Vereinsbank in Bern establishing representation in the last of the major cities in Switzerland.
Through the Great Depression, UBS pared its assets considerably shrinking from CHF993 million in 1929 to CHF441 million at the end of 1935. The bank saw its shareholders' capital decline from CHF100 million in 1929 to CHF80 million in 1933 and then further to CHF40 million by 1936. However, the bank continued to acquire smaller, weaker competitors, purchasing Banca Unione di Credito in Lugano and Chiasso in 1935 followed by Berner Handelsbank in Bern in 1938. In 1937, UBS established Intrag AG, an asset management business responsible for investment trusts (i.e., mutual funds) and set up the "America-Canada Trust Fund AMCA". Over the years, Intrag would set up a series of other funds, including the "Mutual Fund for Swiss Stocks FONSA" and the "South Africa Trust Fund SAFIT".
The Bank in Winterthur and the Toggenburger Bank merge to form the Schweizerische Bankgesellschaft. Its French name is Union de Banques Suisses (UBS) and its Italian name is Unione di Banche Svizzere (UBS). The English name of the bank at first is Swiss Banking Association. In 1921 that somewhat inappropriate name is changed into Union Bank of Switzerland (UBS).
The merged bank shows the following figures for 1912: Total assets: CHF202 million. Shareholders' Equity: CHF46 million. Profit: CHF2.4 million.
Dr. Rudolf Ernst (1865–1956)
First Chairman of the Board of Directors of the merged bank from 1912 until 1941 is Rudolf Ernst, of Winterthur, until 1921 alternating with C. Emil Grob-Halter of Lichtensteig.
After the merger of the Bank in Winterthur and the Toggenburger Bank to form Union Bank of Switzerland (UBS), Dr. Rudolf Ernst became the merged bank's first chairman in 1912. Following his resignation in 1941, he was elected as an Honorary chairman of Union Bank of Switzerland.
Rudolf Ernst joined the Bank in Winterthur in 1895. He was also financial director of the City of Winterthur for 16 years. At the young age of 36, he was elected in 1901 to the Board of Directors of the Bank in Winterthur and as its chairman at the same time. During his chairmanship, the bank changed its focus from its original lending business and began to expand its issuing and asset management franchise. With the acquisition of the Bank in Baden in 1906, the bank gained a branch in Zürich and a seat on the stock exchange, one of the cornerstones for the successful merger in 1912 with the Toggenburger Bank to form Union Bank of Switzerland. Rudolf Ernst also held directorships on the boards of various industrial and insurance companies. Between 1912 and his retirement in 1941, he was chairman of the Board of Union Bank of Switzerland, in an alternating capacity with Carl Emil Grob-Halter, who held the chairmanship in 1916 and 1918 as the representative of the merger partner Toggenburger Bank.
Activities in World War II On the eve of World War II, UBS was the recipient of a large influx of foreign funds for safekeeping. During the war, the bank's traditional business fell off and the Swiss government became their largest clients. Still, unlike many of its peers, UBS's business lagged through much of the war.
Decades after the war, it was demonstrated that Union Bank of Switzerland likely took active roles in trading stolen gold, securities and other assets during World War II.Swiss Were Part of Nazi Economic Lifeline, Historians Find. New York Times, 2 December 2001.Switzerland: A Painful History. TIME, 24 February 1997.Breaking The Swiss Banking Silence. New York Times, 4 June 1996. The issue of "unclaimed property" of Holocaust victims became a major issue for UBS in the mid-1990s and a series of revelations in 1997 brought the issue to the forefront of national attention in 1996 and 1997.Swiss Envoy in U.S. in Midst of a Squall. New York Times, 20 January 1997. UBS confirmed that a large number of accounts that had gone unclaimed as a result of the bank's policy of requiring death certificates from family members to claim the contents of the account.Ulrich Jost, Swiss historian : Bank Secrecy Was Bern's Wartime 'Weapon'. New York Times, 1 August 1997.Probe lays bare Swiss wartime role , SwissInfo.ch, 22 March 2002. UBS's handling of these revelations were largely criticized and the bank received significant negative attention in the U.S.How Swiss Strategy on Holocaust Fund Unraveled. New York Times, 26 January 1997.More Blundering by Swiss Banks. New York Times, 3 August 1997. UBS came under significant pressure, particularly from American politicians, to compensate Holocaust survivors who were making claims against the bank.New York Punishes Swiss Bank Over Nazi Gold. New York Times, 10 October 1997.
In January 1997, Christoph Meili, a night watchman at the Union Bank of Switzerland, found employees shredding archives compiled by a subsidiary that had extensive dealings with Nazi Germany. The shredding was in direct violation of a recent Swiss law adopted in December 1996 protecting such material. UBS acknowledged that it had "made a deplorable mistake", but an internal historian maintained that the destroyed archives were unrelated to the Holocaust.The Rescuer of Swiss Bank Ledgers. New York Times, 17 January 1997. Criminal proceedings then began against the archivist for possible violation of a recent Federal Document Destruction decree and against Meili for possible violation of bank secrecy, which is a criminal offence in Switzerland. Both proceedings were discontinued by the District Attorney in September 1997.Parliament of Canton of Zürich: Protocol of the session of Monday, April 20, 1998 (Word document). URL last accessed 2006-10-30.
Meili was suspended from his job at the security company that served UBS, following a criminal investigation. Meili and his family left Switzerland for the United States where they were granted political asylum.U.S. Congress: Bill S.768: A bill for the relief of Michel Christopher Meili, Giuseppina Meili, Mirjam Naomi Meili, and Davide Meili; private bill sponsored by Senator Alphonse D'Amato, signed into private law 105-1 by president Bill Clinton on 29 July 1997. URL last accessed 2006-10-30.Swiss parliament, Summer session 1997: Question Schlüer and the response of Federal Councillor Flavio Cotti, who claimed that the U.S. was not granting the Meilis "asylum" but a facilitated fast-track immigration. URLs last accessed 2006-10-30. By contrast, in the U.S., Meili was largely regarded as a hero and whistleblower and received a particularly warm reception from the American Jewish community.PRNewswire: L.A. Jewish Community Honors Christoph Meili At May 8th Dinner at the Beverly Hilton Hotel, news agency report dated 1 May 2000. URL last accessed 2006-10-30.