Göran Bergendahl

DEA and benchmarks – an application to Nordic banks

In this paper, Data Envelopment Analysis (DEA) is developed to analyze the efficiencyof a single bank. The inputs are given in terms of cost of personnel, cost of material andexpected cost of credit losses. Outputs concern lending, deposits and gross revenues (interestmargins and non-interest income). The data covers 48 large Nordic banks during the twoyears 1992 and 1993. Fourteen banks are from Denmark, thirteen from Finland, twelve fromNorway and nine from Sweden. For each of these banks, the DEA method is used to form a“reference bank”, which is a convex combination of the best competing banks (those at theefficiency frontier). The three inputs and the three outputs of the reference bank will beused as benchmarks. This procedure implies that one can only say that one single bank isless efficient than its reference bank, not less efficient than another bank. The results showthat 4-7 Nordic banks were situated at the efficiency frontier for those two years. Thesebanks should then be used to form reference banks for other banks, and to set benchmarksfor them. Such benchmarks would have been slightly different, dependent on the “window”to be used, 1992, 1993 or 1992 + 1993.

What does it Cost to Make a Payment

We survey the limited data that exists concerning the cost of making/receiving a payment by banks, retailers, and other parties to a transaction. Since an electronic payment costs between one-third and onehalf that of a paper-based instrument, a country may save 1% of its GDP annually as it shifts from a fully paper-based to a fully electronic-based payment system. Some gains have already been realized. Additional analysis indicates that bank costs of making a payment may have fallen by 45% in Europe as the share of electronic transactions in 12 countries rose from .43 to .79 over 1987-1999.

The profitability of bancassurance for European banks

Develops principles for banks that want to evaluate the distribution of life insurance as well as non‐life insurance products and identifies key factors for profitability. Analyses the costs of training personnel, the costs of computers and communication, the fixed and variable sales costs, and the costs of administration including customer service. These costs have to be covered by direct benefits in terms of commissions and indirect benefits in terms of more faithful bank customers. Then estimates the profitability of the distribution through a branch network. Develops a model to calculate the “break‐even” sales volume. Identifies five key factors: the number of branches; the number of specialists per branch; the number of customers to the bank; the cross‐selling ratio; and the reduction over time in costs of selling and administration. Gives two examples from the banking sector.

Evaluating the performance of Swedish savings banks according to service efficiency

Abstract This article develops principles for an evaluation of the efficiency of a savings bank. It starts out from the observation that such a bank is less profit oriented than a commercial bank. The customer is a vital stakeholder to the savings bank implying a greater emphasis on customer service provision. We are using data envelopment analysis (DEA) as a method to consider the service orientation of savings banks. We thereby demonstrate how an evaluation of the performance of savings banks according to “service efficiency” differs from an evaluation based on the traditional “profit” or shareholder concept. We determine the number of Swedish savings banks being “service efficient” as well as the average degree of service efficiency in this industry.

Pricing of Payment Services: A Comparative Analysis of Paper-based Banking and Electronic Banking

This paper aims at comparing paper-based banking and electronic banking in terms of cost-efficiency and pricing. The focus is primarily on giro payments made manually by mail and electronically via the Internet, but also by cash over the counter. The paper presents principles of efficient pricing in terms of production fees and capacity fees. It also demonstrates that the current pricing of payment services in Norway and Sweden is far away from these principles as production fees are set below marginal costs while capacity fees are in many cases above capacity costs. Such deviations may stimulate customers to an excess demand for electronic payments while paper-based payments will be depressed.

The Management of Foreign Exchange Exposures

Since 1986, the international foreign exchange market has grown from US

Investment in Combined Heat and Power: CHP

208 billion in daily turnover (including spot, outright forward and foreign exchange swap transaction) to US

The Future of Relationship Banking

3.9 trillion in 2008 (Bank for International Settlement, 2010). The FDI1 activity of mainly multinational companies (MNC) grew from around US

The Management of International Cash Transactions and Associated Foreign Exchange Transactions

86.3 billion to around US

Duration Analysis: An Overview

1.8 trillion in 2008 (UnctadStat, 2010). During the same period, international trade volumes grew from about US