Regional Efficiency in European Union Banking Industry—Traditional and DEA Approach

Anita Peša, Martina Maté () and Marijana Jerić
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Anita Peša: University of Zadar
Martina Maté: University of Zadar
Marijana Jerić: University of Zadar

A chapter in The Changing Financial Landscape, 2021, pp 123-139 from Springer

Abstract: Abstract Efficient banking system plays an important role in stable economic development. Aware that diminishing of the differences is crucial for even development in EU member countries, the policymakers decided to accelerate the implementation of common banking market with establishment of Banking union. Crucial goal of BU is to reduce financial fragmentation in euro area market, attract EU Member States that are still outside of Monetary Union to join, and lower bank compliance costs to improve overall efficiency of banking systems. The goal of this paper is to present the measurement results of efficiency in the banking sector markets of EU-28 member countries. Two methods were used to examine the efficiency, financial indicator-based approach using ROA and ROE ratios and Data Envelopment Analysis DEA as evaluation model for calculating efficiency scores. Banking systems are classified according to share of total banking assets to national GDP and analysed separately. The DEA results show that the overall efficiency of banking systems in 2018 is lower than in 2017. The best efficiency results are achieved in small banking systems, with amount of total banking assets lower than national GDP, and the reduction of efficiency is showing in the group of large banking systems.

Keywords: Measure of banking efficiency; EU member states; Financial indicators; Data envelopment analysis; C58; F65; G21 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-030-82778-6_8

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DOI: 10.1007/978-3-030-82778-6_8

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