Measuring Banking Efficiency during Crisis Period Using Data Envelopment Analysis: Western Balkan Countries Case

Abstract

The recent years’ crisis has affected the Western Balkan economies. The deterioration of macroeconomic indicators was reflected particularly in the banking sector developments as main segment of their financial systems. Referring to the results of previous personal study (Varesi, L., 2014), the banking efficiency, profitability, liquidity, capital adequacy ratios fell during the crisis period compared with that before. The lending remained low despite the continuous reduction of interest rates due to the contraction of these economies. Fluctuations, instability and uncertainties increase the vulnerabilities of financial systems and complicates the banking sector supervision and enforcement of banking regulations. This paper aims to examine the technical efficiency of the banking sector of six Western Balkan countries considered each as a Decision Making Unit, using Data Envelopment Analysis and the intermediation approach according to Avkiran, N.K.,(2006). The paper intends to present differences in the estimated efficiencies to the variables used in representing the size of the banking sector by number of branches, total assets and total loans. The evaluation of efficiencies refers to the year 2007 to 2012. The effects of 2008 crises in the efficiency of banking sector of WB countries are also examined in this comparative study.

DOI: 10.5901/mjss.2015.v4n1p261