Consistency Conditions for Regulatory Analysis of Financial Institutions: A Comparison of Frontier Efficiency Methods
WP FSRG 02-97 |
![]() |
This working paper is from the Financial Services working paper series.
We propose a set of consistency conditions that frontier efficiency measures should meet to be most useful for regulatory analysis or other purposes. The efficiency estimates should be consistent in their efficiency levels, rankings, and identification of best and worst firms, consistent over time and with competitive conditions in the market, and consistent with standard nonfrontier measures of performance. We provide evidence on these conditions by evaluating and comparing efficiency estimates on U.S. bank efficiency from variants of all four of the major approaches -- DEA, SFA, TFA, and DFA -- and find mixed results.
JEL Classification: G21, G28, E58
Keywords: Financial Institutions, Efficiency, Regulation
Suggested citation: Bauer, Paul, Allen Berger, Gary Ferrier, and David Humphrey, 1996. “Consistency Conditions for Regulatory Analysis of Financial Institutions: A Comparison of Frontier Efficiency Methods,” Federal Reserve Bank of Cleveland, Working Paper, Financial Services Research Group no. 02-96.
Upcoming EventsSEE ALL
-
09.15.22
FedUniversity: Internships at the Federal Reserve Bank of Cleveland
Join us on September 15, noon to 1:00pm, to learn about the Cleveland Fed’s annual internship program.
-
09.29.22
Inflation: Drivers and Dynamics Conference 2022
The Inflation: Drivers and Dynamics 2022 conference, co-sponsored by the Center for Inflation Research and the European Central Bank will take place on September 29-30, 2022 in Cleveland, OH.
-
10.06.22
Conference on Real-Time Data Analysis, Methods, and Applications
The Federal Reserve Bank of Cleveland is sponsoring the Annual Conference on Real-Time Data Analysis, Methods, and Applications in Macroeconomics and Finance to be held in Cleveland, Ohio, at the Cleveland Reserve Bank on Thursday and Friday, October 6–7, 2022.
-
11.17.22
2022 Financial Stability Conference: Frontier Risks, a New Normal, and Policy Challenges
The Federal Reserve Bank of Cleveland and the Office of Financial Research will host their 10th annual financial stability conference on November 17–18, 2022. This year’s conference is titled Financial Stability: Frontier Risks, a New Normal, and Policy Challenges.