Efficiency of banks in Slovakia: Measuring by DEA models
Efficiency of banks in Slovakia: Measuring by DEA models

Summary/Abstract: Stability of the financial system depends on the stability of its individual elements, banking system being the most important among them. In the today’s competitive environment, Slovak banking sector consists of a large number of banks offering a wide range of services. For the banks operating in such environment it is not enough to distinguish themselves only through the parameters of products which are bringing short-term effects, but it is essential for them to build competitive advantage with some long-term perspective. The key contribution to a long-term strategy of any bank is assessment of its activities from the perspective of performance and efficiency. When analysing the actual situation, banks are trying to assess realistically their strengths and weaknesses regarding products, pricing, distribution, communication policy, bank management, organization structure etc. They assess their efficiency relative to other banks. For this purpose, banks use various methods seeking to find the most suitable combination of financial and non-financial assessment indicators. There are parametric and non-parametric methods for efficiency assessment. The most common method in the banking sector is the non-parametric method – Data Envelopment Analysis (or DEA models). It allows analyzing the efficiency of transformation of multiple inputs into multiple outputs with the help of efficiency score. In the paper, DEA models were employed to assess the efficiency of Slovak banking sector. The three largest banks at Slovak national banking market were found to be efficient in both analysed years. Slovenská sporiteľňa, a.s. was efficient in all the models with different combinations of inputs and outputs.

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