Banking productivity: an overview of the Greek banking system

Abstract

PurposeThe aim of this paper is to examine the productivity of the Greek banking sector for the time period 2004‐2006.Design/methodology/approachStandard ratio measures of bank financial performance have been used as output measures in a data envelopment analysis model in combination with efficiency ratios’ analysis.FindingsThe Greek banking efficiency remains relatively constant throughout the period under observation, while, on average, big banks perform better than medium and small ones.Research limitations/implicationsProfit and loss accounts as well as balance sheet accounts of each bank are used for examining bank efficiency.Practical implicationsA positive relationship between bank size and performance is observed. More specifically, it is suggested that large total assets gives a bank the ability to achieve higher efficiency levels; thus, a merger of two small banks will probably increase their efficiency and competitiveness in the long term.Originality/valueGreek banks are at a crossroad and faced with the dilemma of expanding their operations internationally or staying at home. The current financial crisis has made this dilemma stronger. The paper's findings suggest that probably the best solution for the Greek banks to overcome their current problem is to merge.</jats:sec