Measuring the efficiency of the banking industry before and after the recent financial crisis: some international evidence

Abstract

The recent financial crisis has plagued banking institutions around the world. Using a non-parametric (Data Envelopment Analysis) approach, we measure operating and profit efficiency of 21 commercial banks from five countries during 2004-2010. The results suggest that for the most part there is no statistically significant difference in the efficiency scores before and after the crisis. We found that both sets of efficiency scores are high which limits the scope for any further efficiency improvements of the sampled banks either in terms of operations or profitability. An examination of financial ratio reveals that all the sampled banks increased their capital adequacy and loan loss provisions in the post-crisis period.