The Collapse of the Savings & Loan Bank Thun in the Year of its 125th Anniversary (1991)

Research Paper (postgraduate) from the year 2021 in the subject Economics - Finance, grade: 1.0, University of Geneva (Paul Bairoch Institute of Economic History), language: English, abstract: 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.