Efficiency in Private Banking : Evidence from Switzerland and Liechtenstein

This paper examines the technical efficiency of private banking institutions in Switzerland and Liechtenstein by means of data envelopment analysis (DEA). The average wealth manager's relative inefficiency level is found to exceed 20% in most of the years between 2003-2007. Results also reveal that the average bank is well above its efficient scale of operations. Private banks from Liechtenstein fare better than their Swiss counterparts. Specialization and investment performance appear to be important factors in distinguishing efficient from inefficient institutions. The significance of these bank features, however, can be traced back to the worst performers in the sample. Bank size, capital strength, asset composition, network size, and ownership do not help answer the question of what constitutes an efficient wealth manager