IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

- Credit Risk And Efficiency In The European Banking Systems: A Three-Stage Analysis

  • José Manuel Pastor Monsálvez

    (Universitat de València)

Increased competition and the attempts of European banks to increase their presence in other markets may have affected the efficiency and credit risk. The first of this aspects is based on the incentive to the banks to reduce cost in order to gain in competitiveness. The second is associated to their lack of knowledge of such markets and/or acceptance of a higher risk in order to increase their market share. Despite the importance of these aspects, banking literature has usually analyzed the effects of competition on the efficiency of banking systems without considering these aspects. The few studies that attempt to obtainrisk adjusted efficiency measures do not consider that part of the risk is due to exogenous circumstances. This article proposes a new three stage sequential technique, based on theDEA model and on the decomposition of risk into its internal and external components, for obtaining efficiency measures adjusted for risk and environment. It is seen that the technique allows the use of any existing technique of incorporation of environmental variables in DEA analysis. El incremento de la competencia y los intentos de los bancos europeos por aumentar supresencia en otros mercados pueden haber afectado tanto al nivel de eficiencia bancaria como alriesgo de crédito. El primero de los aspectos se fundamenta en el incentivo que tienen los bancosa reducir los costes para ganar competitividad. El segundo, está asociado a la ausencia decompetencia en tales mercados y/o a la aceptación de niveles mayores de riesgo con el fin deincrementar la cuota de mercado. A pesar de la importancia de estos aspectos, la literaturabancaria tradicionalmente ha analizado los efectos de la competencia en la eficiencia de lossistemas bancarios sin considerar estos efectos sobre el riesgo. Los escasos estudios queintentan obtener medidas de eficiencia ajustadas por el riesgo no consideran que parte del riesgoes debido a circunstancias exógenas. Este artículo propone una nueva técnica secuenciencial entres etapas, basado en el modelo DEA y en la descomposición del riesgo en sus componentesexterno e interno, para la obtención de medidas de eficiencia ajustadas por el riesgo y elambiente. La técnica se aplica al análisis de la eficiencia de los sistemas bancarios europeos ypermite el uso de cualquiera de las tecnicas existentes para la incorporación de variablesambientales en un contexto DEA.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: Fisrt version / Primera version, 1999
Download Restriction: no

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 1999-18.

in new window

Length: 33 pages
Date of creation: Dec 1999
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:1999-18
Contact details of provider: Postal: C/ Guardia Civil, 22, Esc 2a, 1o, E-46020 VALENCIA
Phone: +34 96 319 00 50
Fax: +34 96 319 00 55
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Allen N. Berger & David B. Humphrey, 1990. "Measurement and efficiency issues in commercial banking," Finance and Economics Discussion Series 151, Board of Governors of the Federal Reserve System (U.S.).
  2. Joseph P. Hughes & Loretta J. Mester, . "A Quality and Risk-Adjusted Cost Function for Banks: Evidence on the "Too-Big-To-Fail" Doctrine," Rodney L. White Center for Financial Research Working Papers 25-92, Wharton School Rodney L. White Center for Financial Research.
  3. Allen, Linda & Rai, Anoop, 1996. "Operational efficiency in banking: An international comparison," Journal of Banking & Finance, Elsevier, vol. 20(4), pages 655-672, May.
  4. David C. Wheelock & Paul W. Wilson, 1993. "Explaining bank failures: deposit insurance, regulation, and efficiency," Working Papers 1993-002, Federal Reserve Bank of St. Louis.
  5. Loretta J. Mester, . "Efficiency of Banks in the Third Federal Reserve District," Rodney L. White Center for Financial Research Working Papers 02-94, Wharton School Rodney L. White Center for Financial Research.
  6. Allen N. Berger & Robert DeYoung, 1997. "Problem loans and cost efficiency in commercial banks," Finance and Economics Discussion Series 1997-8, Board of Governors of the Federal Reserve System (U.S.).
  7. Joseph P. Hughes & Choon-Geol Moon, 1997. "Efficient Banking Under Interstate Branching," Departmental Working Papers 199609, Rutgers University, Department of Economics.
  8. Allen N. Berger & David B. Humphrey, 1997. "Efficiency of Financial Institutions: International Survey and Directions for Future Research," Center for Financial Institutions Working Papers 97-05, Wharton School Center for Financial Institutions, University of Pennsylvania.
  9. Loretta J. Mester, 1994. "How efficient are Third District banks?," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 3-18.
  10. David Humphrey, 1993. "Cost and technical change: Effects from bank deregulation," Journal of Productivity Analysis, Springer, vol. 4(1), pages 9-34, June.
  11. Richard S. Barr & Thomas F. Siems, 1994. "Predicting bank failure using DEA to quantify management quality," Financial Industry Studies Working Paper 94-1, Federal Reserve Bank of Dallas.
  12. José Manuel Pastor Monsálvez, 1995. "Eficiencia, Cambio Productivo Y Cambio Técnico En Los Bancos Y Cajas De Ahorro Españolas: Un Análisis Frontera No Paramétrico," Working Papers. Serie EC 1995-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  13. Ana Lozano Vivas & Jesús Tadeo Pastor Ciurana & José Manuel Pastor Monsálvez, 1997. "Efficiency of European banking systems: A correction by environment variables," Working Papers. Serie EC 1997-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  14. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
  15. Berg, Sigbjorn Atle & Forsund, Finn R. & Hjalmarsson, Lennart & Suominen, Matti, 1993. "Banking efficiency in the Nordic countries," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 371-388, April.
  16. Rajiv D. Banker & Richard C. Morey, 1986. "The Use of Categorical Variables in Data Envelopment Analysis," Management Science, INFORMS, vol. 32(12), pages 1613-1627, December.
  17. José Manuel Pastor Monsálvez, 1998. "- Efficiency And Risk Management In Banking Firms: A Method To Decompose Risk," Working Papers. Serie EC 1998-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ivi:wpasec:1999-18. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departamento de Edición)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.