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Bank Efficiency in the Enlarged European Union

Author

Listed:
  • Dániel Holló

    (Magyar Nemzeti Bank (at the time of writing the study))

  • Márton Nagy

    () (Magyar Nemzeti Bank)

Abstract

This paper aims to estimate bank efficiency differences across member states of the European Union and tries to explain their causes. We show on an empirical basis that the level and spread of bank efficiency in the EU and their changes are significantly determined by characteristics of operational environment and the “conscious” behaviour of management.In the long term, through the integration of financial markets and institutions, as well as the establishment of the Single European Banking Market, the impact of advantages and disadvantages underlying the operational environment is reduced or eliminated; therefore only managerial ability is of any relevance. Our findings suggest that there is a costefficiency gap and convergence between the old and new member states, irrespective of the specifications of the model. With respect to profit efficiency, however, differences in efficiency between the two regions are only established after controlling for some major characteristics of the varying operational environments. Our study also investigates the relevance of and the correlation between accounting-based and statistics-based efficiency indicators. We conclude that the accounting based efficiency indicators are inadequate for managing heterogeneity arising from institutional and operational environments. Hence such indicators only allow limited cross-sectional comparison through time.

Suggested Citation

  • Dániel Holló & Márton Nagy, 2006. "Bank Efficiency in the Enlarged European Union," MNB Working Papers 2006/3, Magyar Nemzeti Bank (Central Bank of Hungary).
  • Handle: RePEc:mnb:wpaper:2006/3
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    File URL: http://www.mnb.hu/letoltes/wp2006-3.pdf
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    References listed on IDEAS

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    1. Paul van den Noord & Richard Herd, 1993. "Pension Liabilities in the Seven Major Economies," OECD Economics Department Working Papers 142, OECD Publishing.
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    3. Monika Queisser & Edward R. Whitehouse, 2006. "Neutral or Fair?: Actuarial Concepts and Pension-System Design," OECD Social, Employment and Migration Working Papers 40, OECD Publishing.
    4. Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December.
    5. Alessie, Rob & Angelini, Viola & van Santen, Peter, 2013. "Pension wealth and household savings in Europe: Evidence from SHARELIFE," European Economic Review, Elsevier, pages 308-328.
    6. Andras Simonovits, 2011. "The Mandatory Private Pension Pillar in Hungary: An Obituary," IEHAS Discussion Papers 1112, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mamatzakis, Emmanuel & Staikouras, Christos & Koutsomanoli-Filippaki, Anastasia, 2008. "Bank efficiency in the new European Union member states: Is there convergence?," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 1156-1172, December.
    2. Tecles, Patricia Langsch & Tabak, Benjamin M., 2010. "Determinants of bank efficiency: The case of Brazil," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1587-1598, December.
    3. Eller, Markus & Haiss, Peter & Steiner, Katharina, 2006. "Foreign direct investment in the financial sector and economic growth in Central and Eastern Europe: The crucial role of the efficiency channel," Emerging Markets Review, Elsevier, vol. 7(4), pages 300-319, December.
    4. Fotios Pasiouras, 2008. "International evidence on the impact of regulations and supervision on banks’ technical efficiency: an application of two-stage data envelopment analysis," Review of Quantitative Finance and Accounting, Springer, vol. 30(2), pages 187-223, February.
    5. Cândida Ferreira, 2011. "European integration and banking efficiency: a panel cost frontier approach," Working Papers Department of Economics 2011/04, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    6. Marko Košak & Peter Zajc & Jelena Zorić, 2009. "Bank efficiency differences in the new EU member states," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(2), pages 67-90, December.

    More about this item

    Keywords

    parametric approach; X- and alternative profit-efficiency; Fourier-flexible functional form; banking system.;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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