Improving Service Performance in Banking using Quality Adjusted Data Envelopment Analysis

The goal of this research is to describe the application of data envelopment analysis (DEA) to the performance evaluations of bank branches. Special attention is focused on how to incorporate the quality dimension into branch efficiency. DEA will apply to a set of micro-data from a Czech commercial bank branch network. In the banking sector, providing services quality is one of the key focuses. Therefore, the quality dimension should be incorporated into the DEA model. The goal of the quality adjusted DEA model is to identify best practice branches that work efficiently and at the same time provide services with high quality. This model avoids productivity-quality tradeoff, which is present by the standard DEA model. The quality of services is measured by customer service, mystery shopping and calls, client information index, retention, and client product penetration. Main determinants of efficiency and quality level are branch size and region via purchasing power.quality adjusted DEA, branch performance, scale efficiency, return to scale

Policy Risk in Action: Pension Reforms and Social Security Wealth in Hungary, Czech Republic, and Slovakia

We provide evidence on the policy risk of social security in Hungary, Czech Republic and Slovakia by computing the changes in the social security wealth induced by the pension reforms undertaken since the 1990s. Methodologically we follow upon McHale’s (2001) study of selected reforms in G7 countries. However, as we measure the differential impact of the reform on workers of different genders, ages, and levels of education, we are able to capture the aggregate, intergenerational, and intragenerational aspects of the policy risk. Overall, the paper documents that also a pay-as-you-go system is not a secure source of retirement income since pension reforms do change the future contributions and benefits in different directions for different workers, and the magnitude of the reductions in social security wealth sometimes exceeds several years’ worth of the workers’ earnings.social security, policy risk, pension reforms

Policy Risk in Action: Pension Reforms and Social Security Wealth in Hungary, Czech Republic, and Slovakia

We provide evidence on the policy risk of social security in Hungary, Czech Republic and Slovakia by computing the changes in the social security wealth induced by the pension reforms undertaken since the 1990s. Methodologically we follow upon McHale’s (2001) study of selected reforms in G7 countries. However, as we measure the differential impact of the reform on workers of different genders, ages, and levels of education, we are able to capture the aggregate, intergenerational, and intragenerational aspects of the policy risk. Overall, the paper documents that also a pay-as-you-go system is not a secure source of retirement income since pension reforms do change the future contributions and benefits in different directions for different workers, and the magnitude of the reductions in social security wealth sometimes exceeds several years’ worth of the workers’ earnings.social security, policy risk, pension reforms

Modeling Bank Loan LGD of Corporate and SME Segments: A Case Study

Loss given default (LGD) is one of key parameters to estimate credit risk in an internal rating based approach considered in The New Basel Capital Accord. The aim of this paper is to find determinants of LGD using a set of firm loan micro-data of an anonymous Czech commercial bank. The authors find that LGD is driven primarily by the period of loan origination, relative value of collateral, loan size and length of business relationship. Different models employed in their analysis provide similar results; in more complex models, log-log models appear to perform better, implying an asymmetric response of the dependent variable.credit risk, loss given default, fractional responses, ordinal regression, quasi-maximum likelihood estimator

Three essays on banking and pensions

The recent financial crisis has impacted several financial areas. Particularly, it influences (1) savings on pension accounts that are invested on financial markets and are faced with financial risk and risky changes driven by political decisions; (2) already regulated banking sectors through Basel II, where it is essential to identify in advance the key drivers of loss given default of firm sector and to identify the problematic cases from the credit perspective that directly impacts the real economy; and (3) profit-based strategies of the bank branch network by optimizing resource allocation of branch networks and by improving quality of customer services in order to garner the loyalty of existing customers and to fully utilize their possibilities. The thesis examines the above mentioned areas and consists of three empirical essays on pensions and banking. It is a collection of essays dealing with different aspects of risk, and it contributes to the recent debates about politically embedded risk in the pension system, credit risk faced by private institutions, and the performance assessment of banks' branches, focusing on quality dimension

Tři eseje o bankovnictví a penzích

Současná finanční krize má dopad na několik finančních oblastí. Konkrétně ovlivňuje (1) úspory na penzijních účtech, které jsou investované na finančních trzích a jsou konfrontované s finančními riziky a riskantními změnami řízenými politickými rozhodnutími, (2) regulaci bankovního sektoru prostřednictvím Basilejské dohody II, kde je potřebné určit hlavní faktory ztráty při selhání firmy a identifikovat problematické případy z úvěrového pohledu, které mají přímý dosah na reálnou ekonomiku, a (3) ziskové strategie pobočkové sítě banky optimální alokací zdrojů a zlepšením kvality zákaznických služeb s cílem upevnit loajalitu existujících zákazníků a plně využít jejich možnosti. Práce sa zabývá výše uvedenými oblastmi, skládá se z třech empirických částí zaměřených na penzijní systémy a bankovníctví. Je to sbírka esejů zabývajících se různými aspekty rizík, která přispívá k aktuální diskusi o politických rizicích penzijních systému, úvěrovém riziku, kterému čelí soukromé instituce, vyhodnocování efektivnosti poboček vzhledem na kvalitatívní indikátory.The recent financial crisis has impacted several financial areas. Particularly, it influences (1) savings on pension accounts that are invested on financial markets and are faced with financial risk and risky changes driven by political decisions; (2) already regulated banking sectors through Basel II, where it is essential to identify in advance the key drivers of loss given default of firm sector and to identify the problematic cases from the credit perspective that directly impacts the real economy; and (3) profit-based strategies of the bank branch network by optimizing resource allocation of branch networks and by improving quality of customer services in order to garner the loyalty of existing customers and to fully utilize their possibilities. The thesis examines the above mentioned areas and consists of three empirical essays on pensions and banking. It is a collection of essays dealing with different aspects of risk, and it contributes to the recent debates about politically embedded risk in the pension system, credit risk faced by private institutions, and the performance assessment of banks' branches, focusing on quality dimension.Institut ekonomických studiíInstitute of Economic StudiesFaculty of Social SciencesFakulta sociálních vě

Modelling Bank Loan LGD of Corporate and SME Segments: A Case Study

The aim of this paper is to propose a methodology to estimate loss given default (LGD) and apply it to a set of micro-data of loans to SME and corporations of an anonymous commercial bank from Central Europe. LGD estimates are important inputs in the pricing of credit risk and the measurement of bank profitability and solvency. Basel II Advance IRB Approach requires internally estimates of LGD to calculate risk-weighted assets and to estimate expected loss. We analyse the recovery rate dynamically over time and identify the efficient recovery period of a workout department. Moreover, we focus on the appropriate choice of a discount factor by introducing risk premium based on a risk level of collaterals. We apply statistical methods to estimate LGD and test empirically its determinants. Particularly, we analyse generalised linear models using symmetric logit and asymmetric log-log link functions for ordinal responses as well as for fractional responses. For fractional responses we employ two alternatives, a beta inflated distribution and a quasi-maximum likelihood estimator. We find out that the main drivers of LGD are a relative value of collateral, a loan size as well as a year of the loan origination. Different models provided similar results. As for the different links in more complex models, log-log models in some cases perform better, implying an asymmetric response of the dependent variable.credit risk, bank loan, loss given default, LGD, recovery rate, fractional responses, ordinal regression, quasi-maximum likelihood estimator