Measuring the efficiency of Australia’s Depository Institutions
September 16, 2011Australia’s deposit institutions are some of the most soundly run and safe in the world and have thus far emerged relatively strongly from the global credit crisis. These strong foundations are largely predicated on fierce competition amongst the big four banks. The ability of banks to compete is largely driven the need to keep cost pressures down. New research by CoreData has revealed that the cost efficiency amongst ADIs tends to be quite divergent.
The focus of the research on which this white paper is based was to better establish the relative efficiency of Australian banks, building societies and credit unions. The research shows that overall, the big four banks tend to have higher efficiency scores than their mutual counterparts. When individually ranked though, a number of mutuals do outperform the banks.
The research reveals though that it is not the institution type that is necessarily related to the cost efficiencies. Economies of scale are revealed to come into play, particularly for ADIs with more than $1 billion in assets, however there is potential for diseconomies at the largest scales.
Back