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Scale effects on efficiency and profitability in the Swiss banking sector

Marc Blatter () and Andreas Fuster ()
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Marc Blatter: Swiss National Bank

Swiss Journal of Economics and Statistics, 2022, vol. 158, issue 1, 1-24

Abstract: Abstract This paper analyzes efficiency and profitability in the Swiss banking sector over the period 1997–2019. We find strong evidence for scale economies: for most banks in the sample, efficiency and profitability increase with bank size. Using an instrumental variables strategy for a subset of geographically restrained banks, we find that the effect of size on efficiency and profitability is likely causal. Scale economies have been more pronounced since 2010 than in the years prior to the global financial crisis. There is little evidence for scale economies for the largest (systemically important) banks; their relatively lower efficiency and lower profitability appear driven by certain aspects of their business model. Our results further indicate that good capitalization and high efficiency and profitability are compatible.

Keywords: Bank efficiency; Profitability; Economies of scale; Financial regulation (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Scale Effects on Efficiency and Profitability in the Swiss Banking Sector (2021) Downloads
Working Paper: Scale effects on efficiency and profitability in the Swiss banking sector (2021) Downloads
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DOI: 10.1186/s41937-022-00091-7

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