The Usefulness Of Study Of Bank Cost And Efficiency

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Comment on the usefulness of study of bank cost and efficiency in evaluating bank performance.


From the very beginning of the bank history, we already know that the main operation of bank is to take loan and to make deposit. Since the first bank established in 12th century, bank is no more a simple institution where we exchange money but an agency considered to be speculative and hopeful. There is no doubt that the prosperity in modern society benefits a lot from the development of commercial activities, where bank plays a main role in. People make money through work or investment. So they divide their income into two major parts : one part is considered as profit ,with which people may consume or do reinvestment or put it
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The main part of supervision including capital adequacy ratio, loan loss reserves, loan centration and bank liquidity. Those indicators are lines play role like fire alarm for the commercial banks to watch out the dangerous at any moment.
Except being alert to those highly explored risks, what commercial banks concern about is the profit. Today, in order to make business more efficient, it is a wise choice for both banks and other kinds of companies to do financing and list practice. With this important step, banks acquire more powerful support to develop branches into a wider scale market: running global business, like HSBC. From the other hand, this can be a unprecedent challenge to the local banks. The main reason why big companies are successful is they do know how to function the business skillful. Works are separated into small pieces and more professional staff are hired to solve special problems. This can be an advantage that local banks lack. Competition makes it clear that local banks have to find their own advantage to survive in the crucial game.
Other competition from financial institution
Even some big companies start to provide relative banking services. Countless financial derivatives also consist as a main part in banking.
Although in the textbook the main assumption is without mortgage, which means that it does not matter whether the borrowers repay their loan or
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