Responsibility Centres' SystemEstablishment for a Better Performance: The Bulgarian Banks Case

Commercial banks in Bulgaria function in conditions of strong competition and quickly changing business environment, in which they should guarantee, but also meet the shareholders' expectations in terms of profitability of the invested funds. In the recent years, the negative processes in the internal and international business situation, mainly the economic crisis impact, have considerably influenced the financial results. However in some cases, despite the consequences of crisis, internal issues stay behind the weak performance. Implementation of appropriate methodology could help in identifying of ineffective components of the organizational structure. Knowing them better would answer how to eliminate these sources of loss. The author's research indicates that currently commercial banks in Bulgaria implement at first stage internal performance measurement systems at organizational unit level based on the responsibility centre concept. Units in the financial institution are grouped and classified in the following categories of responsibility centres: cost centres, revenue centres, profit centres and investment centres. This paper concentrates on methodological aspects of the establishment of responsibility centres system from the perspectives in Bulgarian banks, which if properly addressed by bank managements could improve financial results. Attention is also paid to what should be reported in terms of financial measures, in order to better support the decision making. Incorporation of appropriate indicators in responsibility centre level reports, like net interest margins, contribution margins, centre revenue, etc. would contribute for more precise analyses of internal performance.