Efficiency in the slovak banking industry: A comparison of three approaches

Abstract

The paper emphasizes that any approach to defining technical efficiency in banking is just a different outlook on manifold goals and functions that commercial banks pursue. Three commonly applied approaches, i.e. the service-oriented approach, the intermediation approach and the profitoriented approach, are not in conflict but are complementary in providing information on how commercial banks perform in financial intermediation, provision of banking services and profit seeking. In addition to the methodological contribution of the paper, it investigates the efficiency of the Slovak banking industry over the years 2000–2011 so as to find whether employment of a specific approach changes the view on efficiency of individual commercial banks. To this end, the non-parametric method of evaluation is employed based on the slack-based measure model of data envelopment analysis. The results suggest that general impressions of the efficiency status of individual banks as obtained within the three approaches are similar in most cases.