Switzerland is one of the most recognised countries for financial services and consists of four main financial centres; Basel, Geneva, Lugano and Zurich. Banking sector can be classified as one of the main contributors in Switzerland’s financial sector.
The following paper addresses two main financial centres in Switzerland as ranked seventh and 13th, respectively by The Global Financial Centres Index: Zurich and Geneva
According to the last GFI report: “The top financial centres of the world are very well developed, sophisticated and cosmopolitan cities in their own right. Successful people are attracted to successful cities and it is perhaps no surprise that these centres are ranked so high by financial services professionals.”
Both financial centres profit from Switzerland’s environment which provides legal stability, and high living-standards and as a result, both financial clusters play an important role in the global business of finance.
This paper aims to analyse the current situation as well to provide an outlook for the future. Due to the limited time as well the limited scope, this paper focuses only on the banking sector, mainly analysing twelve major financial institutions with a strong national presence.
Section 2 covers the background and history of both financial centre, Geneva and Zurich.
Section 3 provides a short overview of the market structure of the financial sector as a whole in each financial centre, describing the number of market participants as well as the offered products and services.
Section 4 contains information regarding the competition in both financial clusters in Switzerland and measures competition using the Herfindahl-Hirschman Index (HHI) on two selected examples.
Section 5 provides an empirical analysis of the profitability of both financial centre using carefully selected key-performance-indicators (KPI).
Lastly, the paper provides an overview as well as an outlook into the future.
Table of Contents
1 Introduction
2 Background and History
2.1 Geneva Financial Centre
2.2 Zürich Financial Centre
3 Market Structure
3.1 Geneva
3.1.1 Number of Financial Institutions
3.1.2 Products and Services
3.2 Zurich
3.2.1 Number of Financial Institutions
3.2.2 Financial Cluster in Banking and Insurances Sector
3.3 Market Entry and Exist
4 Competition
5 Profitability
5.1 Financial Institutions for Analysis
5.2 Key-Performance-Indicators
5.3 Regression Analysis
5.3.1 Cost-Income Ratio
5.4 Interest Net Income/Average Assets
5.4.1 Income from Commissions and Services
5.4.2 Total Customer Deposit Growth Rate vs. Net New Credit (loans)
6 Outlook
Research Objectives and Topics
This assignment aims to conduct a comparative analysis of the Geneva and Zurich financial centres, specifically focusing on their respective market structures, competition levels, and profitability within the banking sector.
- Comparative analysis of banking market structures in Geneva and Zurich.
- Measurement of market competition using the Herfindahl-Hirschman Index (HHI).
- Empirical evaluation of profitability via Key Performance Indicators (KPIs).
- Examination of regulatory impacts and entry barriers for financial institutions.
- Discussion of future trends including digitalization and the role of FinTech.
Excerpt from the Book
2.1 Geneva Financial Centre
In the heart of Europe is where Geneva Financial Centre has established its roots which date back several hundred years back.
Geneva became an important trade hub due to its central location between the crossroads of major trade routes from Italy to France and from the Mediterranean to Flanders.
Beginning the financing movement was Bishop Adhémar Fabi who lent money, based on an interest rate.. During this time in 1387, it was a unique privilege to lend money at interest, which no other Christian nation had.
Historically, the GFC has its roots since the fourteenth and fifteenth centuries. At that time Geneva was one of the main centres of European trade capital where traders eventually turned into bankers. By the seventeenth century, Geneva had become a global trading place with growing importance as the trading network was growing.
The free-thinking spirit of Calvinism had further developed banking and trade. By this time, bankers built commercial networks and financed the largest trading companies such as Dutch East India Company, the Royal Bank of England, Royal Manufacture of Mirros (the first European manufacturing company) and more. Bankers were highly recognized and were appointed with duties such as advicing ministers and Kings.
Chapter Summaries
1 Introduction: Provides an overview of the Swiss financial sector and defines the research scope regarding the two major financial centres: Zurich and Geneva.
2 Background and History: Details the historical evolution of the Geneva and Zurich financial centres from their origins to the present day.
3 Market Structure: Outlines the composition of financial institutions, products, and services, and discusses market entry conditions.
4 Competition: Analyzes the market concentration in Switzerland using the Herfindahl-Hirschman Index.
5 Profitability: Provides an empirical performance analysis of selected banking institutions based on specific financial indicators.
6 Outlook: Discusses future challenges and strategic developments, particularly focusing on digitalization and regulatory changes.
Keywords
Switzerland, Geneva, Zurich, Financial Centre, Banking Sector, Market Structure, Competition, Profitability, Cost-Income Ratio, Interest Net Income, Herfindahl-Hirschman Index, Regulation, Digitalization, FinTech, Wealth Management
Frequently Asked Questions
What is the primary focus of this paper?
The paper examines the market structure, competitiveness, and profitability of the financial centres of Geneva and Zurich within the Swiss banking sector.
What are the central themes discussed?
The core themes include the historical background of both centres, the density and type of financial institutions, competitive dynamics measured by the HHI, and bank profitability.
What is the primary objective of this research?
The objective is to provide a comprehensive comparison between the Geneva and Zurich financial centres to identify how they operate and perform.
Which scientific methods are applied?
The authors apply a comparative analysis using Key Performance Indicators (KPIs) and utilize the Herfindahl-Hirschman Index (HHI) for measuring market concentration.
What topics are covered in the main body?
The main body covers the historical development, market structure, competitive landscape, and empirical profitability analysis of selected financial institutions.
Which keywords characterize the work?
The work is characterized by terms such as Financial Centre, Banking Sector, Market Concentration, Profitability, and Swiss Financial Regulations.
How does the study view FinTech companies?
The paper suggests that banks should view FinTech firms as potential partners for cooperation to foster innovation and customer-centric product development.
What role does regulation play in the outlook?
Regulation, particularly the "too big to fail" requirements and Basel III implementation, is identified as a factor increasing operational costs while impacting bank income statements.
- Quote paper
- Marie-Madeleine Meck (Author), Alisha Dhiri (Author), 2016, A Comparison of the Geneva and the Zurich Financial Centre. Market Structure, Competition and Profitability, Munich, GRIN Verlag, https://www.grin.com/document/315808
