Gnomes Of Zurich Essay

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The Gnomes of Zurich is an old tongue-in-cheek term for the Swiss market, and especially Swiss bankers. The term was first used by Harold Wilson, the Shadow Chancellor of the British Parliament in 1964, who believed the Swiss were speculating on the British pound on foreign markets in order to keep its value down. In a speech to the House of Commons, Wilson said:

Traders and financiers all over the world had listened to the Chancellor. He had said that if he could not stop wage claims the country was facing disaster. Rightly or wrongly, these people believed the Chancellor. On September 5th, when the T.U.C. unanimously rejected wage restraint, it was the end of an era, and all the financiers, all the little gnomes in Zürich and other financial centers, had begun to make their dispensations in regard to sterling.

It is interesting to note that Wilson originally spoke of gnomes “in Zurich and other financial centers,” but it was “gnomes of Zurich” that caught on. The use of gnomes here implies the secrecy, shadiness, and miserliness associated with both the fairy-tale creature and the stereotypical Swiss banker. Zurich, though not the political capital of Switzerland, is its cultural and commercial capital—a relationship much like that of New York City to the United States. The Swiss stock exchange, SWX, is located in Zurich, and has been since 1873. It is controlled by an association of 55 banks—those Swiss bankers that so concerned Wilson. SWX was the first stock exchange to fully automate its trades, implementing this system in 1995. The economy of Switzerland, once the richest nation in Europe, has steadily slowed since the 1990s, allowing Ireland, Denmark, and Norway to pass it by. The Swiss Market Index (SMI) has tracked the performance of 20 significant stocks on the SWX since 1988. It is calculated in real time, adjusted whenever a trade transpires involving one of the 20 stocks; while many indices adjust their lists quarterly, the composition of the SMI is reexamined annually.

The 20 companies on the SMI are: ABB, an electronics company; Adecco, an employment services company; Baloise, an insurance provider; Clairant, a chemicals company; Credit Suisse, a banking corporation; Holcim, a building materials company; the Julius Baer Group, an investment services provider; Nestlé, the food company; Nobel Biocare, the medical equipment company; Novartis, the pharmaceuticals company; Richemont, a clothing company; Roche, a pharmaceuticals company; Swatch Group, a clothing company; Swiss Life, an insurance provider; Swiss Re, a reinsurance company; Swisscom, a telecommunications company; Syngenta, a chemicals company; Synthes, a medical equipment company; UBS, a banking company; and Zurich Financial, an insurance provider.


  1. Andreas Grünbichler and Hanspeter Wohlwend, “The Valuation of Structured Products: Empirical Findings for the Swiss Market,” Financial Markets and Portfolio Management (v.19/4, 2005);
  2. Sherrill Shaffer, “Ownership Structure and Market Conduct Among Swiss Banks,” Applied Economics (v.34/16, 2002).

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