Benchmarks of the Efficiency of Bank Branches

The Bank of Cyprus commissioned a study of the efficiency penalties paid by its branches operating in different environments. Bank staff and faculty members of the University of Cyprus jointly developed a data envelopment analysis (DEA) model that was used (1) to provide benchmarks on the relative efficiency of the bank's branches, (2) to provide guidelines for improvement to management, and (3) to isolate the effects of the environment on branch efficiency. The analysis showed that tourist branches were on average more efficient than urban branches during the peak tourist season. The DEA model was also used to benchmark seasonality effects. The analysis revealed branch resource underutilization, which depends on the season. The bank uses the DEA model developed to establish policy guidelines and to provide support for operational decisions toward performance improvement.