The Savings & Loan bank Thun (SLT) was declared insolvent in October 1991, the first year of the regional bank crisis in Switzerland. Pictures of the bank run went around the world and scratched on the extraordinary reputation of Swiss banks. In contrast to other banks who were bailed out by cantons or acquired by bigger banks, the SLT got liquidated in an expensive process that came to an end after 14 years in 2005. The liquidation capital finally amounted only to roughly 60% of the liabilities and that is why the event remains as a trauma in the minds of the region's people.
The collapse of the SLT was the motivation to revise the Swiss banking legislation dating back to the 1930s. It constituted the other comprehensive revision of banking legislation in the last 90 years in Switzerland next to the revision of the too big to fail legislation in the aftermath of the subprime crises and the related UBS bail-out in 2008.
Though data for a detailed comparison is not available, this paper will show that real estate prices on a national level faced heavy declines only after 1991. Hence, either the region of Thun experienced higher price declines already in 1991, which cannot be tested, since regional data is not available, or what will be argued, the SLT was mismanaged and thus more vulnerable to the massive interest rate hike by the SNB in 1989 than other (regional) banks.
Table of Contents
0. Introduction
1. The regional bank crisis
Characteristics of the Swiss banking sector in 1991
Structural changes in the banking sector
Macroeconomic developments
Comparison to other crises
Savings & Loan bank Thun (SLT) in the narrative of the regional bank crisis
2. The case of the Savings & Loan bank Thun (SLT)
Chronology of the Savings & Loan bank Thun’s anniversary year 1991
Savings & Loan bank Thun’s credit activity
Supervision problems/ auditors’ failures
3. Why was the Savings & Loan bank Thun (SLT) not bailed out?
4. Conclusion
5. Bibliography
Objectives and Research Focus
This research paper examines the insolvency of the Savings & Loan bank Thun (SLT) in 1991, challenging the established narrative that it was merely an early victim of the broader Swiss regional bank crisis. The primary research goal is to demonstrate that the SLT’s collapse was driven by internal mismanagement and excessive risk-taking, rather than purely external macroeconomic factors.
- Analysis of the Swiss regional bank crisis during the early 1990s.
- Chronological investigation of the SLT’s business conduct and failures.
- Evaluation of supervision problems and the role of auditors.
- Examination of why the SLT was not bailed out compared to other distressed banks.
- Critical comparison of the SLT case with national macroeconomic trends.
Excerpt from the Book
Chronology of the Savings & Loan bank Thun’s anniversary year 1991
January 29, 1991: Press release by the SLT that exhibits a net profit of 2.82 mln. Swiss francs (1989 2.24 mln.), announces an unchanged dividend of 12% per share + 3% jubilee bonus and ends with the words: “The formation of reserves is directly related to the good earnings position of the SLT. It is the essential prerequisite for a secure future and for the ability to invest, which is essential for a modern bank in today's competitive environment.”
January 28 – February 26 1991: As auditors in accordance with the bank law, the audit office “Bernese regional banks” audited the annual accounts of the SLT for the financial year 1990.
April 2, 1991: The auditors forwarded their audit report dated with March 27, 1991 to the Swiss Federal Banking Commission. The report contained complaints and remarks especially concerning the credit division. The auditors saw themselves not capable to confirm regularity, expediency and functioning of the bank’s credit organisation according to legal provisions.
May 13, 1991: The bank accepted (responsibility for) the complaints.
Summary of Chapters
0. Introduction: Outlines the insolvency of the SLT in 1991 and presents the thesis that its collapse was due to internal factors rather than just the general banking crisis.
1. The regional bank crisis: Provides context on the Swiss banking sector in 1991, structural changes, and macroeconomic developments that characterized the era.
2. The case of the Savings & Loan bank Thun (SLT): Delivers a detailed chronology of the year 1991, analyzes the bank’s aggressive credit activity, and investigates the failures in supervision and auditing.
3. Why was the Savings & Loan bank Thun (SLT) not bailed out?: Explores the specific reasons why, unlike other regional banks, the SLT received no support from the state or major banks.
4. Conclusion: Summarizes the findings, refuting the notion of "bad luck" and emphasizing the role of mismanagement and excessive risk-taking.
5. Bibliography: Lists the primary and secondary sources used for the analysis.
Keywords
Savings & Loan bank Thun, SLT, Switzerland, regional bank crisis, financial crisis, insolvency, bank management, risk-taking, Swiss banking legislation, real estate market, auditing, supervision, liquidity, bank run, 1991
Frequently Asked Questions
What is the core subject of this paper?
The paper focuses on the 1991 bankruptcy of the Savings & Loan bank Thun (SLT) and its position within the broader Swiss regional bank crisis.
What are the primary themes explored?
The work covers bank mismanagement, the effectiveness of supervisory authorities, the role of auditors, and the mechanics of why some banks are bailed out while others are liquidated.
What is the main research question?
The paper investigates whether the SLT was just "unlucky" to be the first bank in trouble or if its failure was primarily caused by distinct internal mismanagement and excessive risk-taking.
What scientific methods were used?
The author uses a qualitative and quantitative analysis of archival data, including bank reports, Federal Banking Commission documents, and media coverage from the period.
What does the main body address?
It provides a chronological analysis of the bank’s final year, evaluates its lending practices, and discusses the specific failures that led to its non-rescue.
Which keywords define this research?
Key terms include SLT, regional bank crisis, Swiss financial history, bank insolvency, and corporate mismanagement.
How does the author characterize the management style of the SLT?
The author describes it as an aggressive expansion strategy characterized by excessive risk-taking and a lack of proper credit documentation.
What role did external auditors play in this failure?
The paper highlights that professional auditors identified issues with the credit organization as early as 1990, but failed to escalate them sufficiently, leading to later legal consequences for those involved.
Why did the authorities refuse to bail out the SLT?
Expectations of huge losses, uncertainty regarding the accuracy of the bank's assets, and the lack of a viable business model deterred other banks from acquiring it.
Does the author agree with the existing narrative of the regional bank crisis?
No, the author challenges the narrative that the SLT was a typical victim of the crisis, arguing that its collapse was a unique case of severe internal mismanagement.
- Citar trabajo
- Jan Gygax (Autor), 2021, The Collapse of the Savings & Loan Bank Thun in the Year of its 125th Anniversary (1991), Múnich, GRIN Verlag, https://www.grin.com/document/1044762
