The performance of universal banks: Evidence from Switzerland

This paper examines the performance of Swiss banks from 1996 to 1999. Using a broad definition of bank output, we find evidence of large relative cost and profit inefficiencies in Swiss banks. A more narrow definition that focuses on only traditional activities leads to efficiency estimates that are even lower. We also find evidence of economies of scale for small and mid-size banks, but little evidence that significant scale economies remain for the very largest banks. Finally, evidence on scope economies is weak for the largest banks that are involved in a wide variety of financial activities. Taken together, these results suggest few obvious benefits from the trend toward larger, universal banks in Switzerland. (C) 2003 Elsevier B.V. All rights reserved.