Arbeitspapier
The cost-efficiency and productivity growth of euro area banks
We use an industrial organisation approach to quantify the size of Total Factor Productivity Growth (TFPG) for euro area banks after the crisis and decompose it into its main driving factors. In addition, we disentangle permanent and time-varying inefficiency in the banking sector. This is important because lack of distinction may lead to biased estimates of inefficiency and because the set of policies needed in both cases is different. We focus on 17 euro area countries over the period 2006 to 2017. We find that cost efficiency in the euro area banking sector amounted to around 84% on average over the 2006 to 2017 period. In addition, we observe that Total Factor Productivity growth for the median euro area bank decreased from around 2% in 2007 to around 1% in 2017, with technological progress being the largest contributor, followed by technical efficiency. Given the need to boost productivity and enhance profitability in the euro area banking sector, these findings suggests that bank's efforts in areas such as rationalisation of branches, digitalisation of business processes and possibly mergers and acquisitions should be intensified.
- ISBN
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978-92-899-3567-8
- Language
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Englisch
- Bibliographic citation
-
Series: ECB Working Paper ; No. 2305
- Classification
-
Wirtschaft
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Subject
-
euro area
banking sector
financial stability
bank productivity
total factor productivity
cost-efficiency frontier
panel data
time-varying inefficiency
permanent inefficiency
- Event
-
Geistige Schöpfung
- (who)
-
Huljak, Ivan
Martin, Reiner
Moccero, Diego
- Event
-
Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
-
Frankfurt a. M.
- (when)
-
2019
- DOI
-
doi:10.2866/77158
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Huljak, Ivan
- Martin, Reiner
- Moccero, Diego
- European Central Bank (ECB)
Time of origin
- 2019
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Estimating multi-period global cost efficiency and productivity change of systems with network structures
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New technologies and productivity growth in the euro area
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Productivity in the euro area: any evidence of convergence?
New technologies and productivity growth in the Euro area
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Competition, productivity and prices in the euro area services sector
Labour cost and employment across euro area countries and sectors
The role of price and cost competitiveness for intra- and extra-euro area trade of euro area countries
Durable goods and ICT: The drivers of Euro area productivity growth?