Efficiency of service delivery systems in large commercial banks

Authors


  • The views expressed in this article are those of the author and not necessarily those of the Federal Reserve Bank of Chicago or the Board of Governors of the Federal Reserve System

Abstract

This article provides novel empirical evidence on the cross-sectional variation of the productive efficiency of large banks relative to their service delivery systems. The analysis is conducted using data drawn from a sample of 118 large U.S. commercial banks for the years 1989 through 1991. The analysis reveals that centralized service delivery systems increase bank costs significantly. In no case was it found that centralized service delivery systems reduce costs, as is often envisioned by proponents of centralization. It is also found that centralized back-office operations tend to reduce costs significantly and are consistent with the existence of scale economies in bank back-office operations. © 1995 John Wiley & Sons, Inc.

Ancillary