The changing face of Swiss banks

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Banking market consolidation

Mergers, takeovers and liquidations create today’s Swiss banking landscape

The decline in the number of banks over recent years is one of the most striking trends in the Swiss banking market. However, it is not primarily the result of a major crisis but rather the manifestation of a long-term consolidation process within the banking sector in Switzerland over the last century.

This continual consolidation is illustrated in Figure 2, which shows the number of new banks joining and existing banks exiting the market between 1900 and 2014. Since the 18th century, almost 90% of the more than 1,900 recorded banks have left the scene. The decline in 1995 was due to the fact that the revised Banking Act no longer provided for bank-like finance companies.

Figure 2

Figure 3

As can be seen in Figure 3, the reasons for banks ceasing to exist are many and varied. Almost half – the largest share – disap­peared through takeovers and mergers. Around one in five were liquidated, while roughly 3% went bankrupt. The definition of what constitutes a bank also plays a big role. Around one third of banks vanished as a result of omission from the statistics, for example because changes to the legal definition of banks led to certain institu­tions no longer being recorded. Calcula­tions indicate that the average lifespan of a Swiss bank is around 50 years, with a median of 32, attesting to the constant change in the banking sector. Banks under­going takeovers, mergers or liquida­tions are thus the rule rather than the exception from a historical perspective.

Big banks have grown up over a lengthy period and have evolved out of multiple predecessor institutions. Figure 4 illustrates the consolidation process with specific reference to UBS. It shows the cumulative number of banks taken over by Union Bank of Switzerland and Swiss Bank Corporation, which merged in 1998 to form UBS. During this period, UBS is the product of at least 110 mergers and takeovers in Switzerland. Taking into account earlier mergers involving the banks subsequently taken over, as well as takeovers abroad, UBS has evolved out of several hundred banks over the course of its history.

Figure 4