Levels of efficiency in UK retail banks: a DEA window analysis

Abstract

This article utilizes DEA window analysis in order to investigate the relative efficiency levels of large UK retail banks during the period of transition 1982–1995. It finds that for the entire sample, the mean inefficiency levels are low in comparison to past studies, that the overall long run average efficiency trend is falling and that all banks in the study show reducing levels of efficiency over the entire time period. It then goes on to disaggregate efficiency into scale and pure technical efficiency and finds that: (1) scale inefficiencies dominate pure technical inefficiencies; (2) less big banks are more likely to report technical inefficiency and (3) during the 1990s banks with asset levels over £105bn suffer decreasing returns to scale