COST EFFICIENCY IN EUROPEAN BANKING

This paper analyses cost efficiency of the banking sectors in the European Union countries over the period 2008 -2014. The Data Envelopment Analysis (DEA) method is applied. The results show a decrease of average cost efficiency in the whole sample. The results of the DEA, by country, indicate that the efficiency ranged from 20.9% in the case of Poland to 100% in the case of the United Kingdom, the Netherlands, Sweden, Malta, and Luxembourg. Cost efficiency was also analyzed in three groups of banking sectors, classified according to the volume of total assets. Large banking sectors seem to be most efficient, where the average cost efficiency during the whole analyzed period was 94.8%. On the second place, there were banking sectors within the medium-sized group (76.2%) and the least efficient were banking sectors in the small sized group (47.9%). In the last part of our analysis four main European "regions" were determined, and average cost efficiency was analyzed within them. According to the results of the analysis, the levels of efficiency in the case of the Northern (78.6%) and Western European (86.3%) banking sectors were higher than the average in the whole sample (64.3%); on the other hand, the average cost efficiencies in the case of the Southern (59.4%) and Eastern European (32.3%) banking sectors were under the total average.