engleski

Evolution of Croatian banking sector efficiency: DEA approach

Croatian financial system is a bank-based system, where banks play a crucial role in transferring funds to economy by approving loans and enabling payments. Thus, the banking sector is a pillar for national economy, because of the important role in the financing of economic activity. In the accordance with abovementioned, efficiency of banks is vital because it affects the soundness of the financial sector and the viability of whole monetary system. Therefore, apprehension of a bank's relative efficiency performance in comparison to the market is important for policymakers and for that reason it is essential to keep track of efficiency evolvement over time. Efficiency of banking industry is, beside traditional ratios, popularly measured using Data Envelopment Analysis (DEA) technique. Therefore, the aim of this paper is, using DEA, to analyse how the efficiency of Croatian banking sector has evolved over time. Moreover, we will scrutinize the results for a year 2016 in order to detect what can be improved to keep efficiency at high level. DEA is based on panel data for the period from 2006 to 2016 and it is based on an input oriented model. Our results show that the overall efficiency has improved over time. The results for 2016 reveal that average overall technical efficiency and pure technical efficiency are between 0.8 and 0.9, due to different scale efficiency. Our results highlight the possibilities for improving the efficiency.

banking sector, efficiency, DEA technique, Malmquist index

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