Data envelopment analysis and its use in banking

Data envelopment analysis (DEA) is a linear-programming-based method for as sessing the performance of homogeneous organizational units and is increasi ngly being used in banking. The unit of assessment is normally the bank bra nch. Studies are mostly centered on deriving a summary measure of the effic iency of each unit, on estimating targets of performance for the unit, and on identifying role-model units of good operating practice. Additional uses for DEA in banking include the measurement of efficiency in light of resou rce and output prices, the estimation of operating budgets that are conduci ve to efficiency, the assessment of financial risk at bank-branch level, an d the measurement of the impact of managerial change initiatives on product ivity.