06/04/2024 – 11:20
The Central Bank published this Tuesday, 4th, another box from the Banking Economics Report (REB), on the “Evolution of the efficiency of the National Financial System (SFN) from the point of view of resource optimization”.
“More efficient financial institutions seek innovations to meet the demands arising from the real economy, improving the supply of financial products and services without threatening the solidity of the SFN. An institution that is not cost-efficient could impose excessive costs on customers. An institution that is not efficient in terms of profitability could be being lenient in managing its business, not generating enough profit for its economic sustainability”, assesses the BC.
The monetary authority used a sample of 232 financial institutions from the banking and non-banking segments, with at least six semiannual data between January 2004 and December 2023.
The data shows that the so-called “cost efficiency” remained relatively stable from 2004 until the 2009 recession, at a level just below 0.90. It then continued on a downward trend until the middle of the 2015-2016 recession. It rose in the following years, showing a jump in the second half of the first year of the Covid-19 pandemic, returning to be relatively stable since then at a level close to 0.90.
“Profit efficiency was on an upward trend from 2004 until the 2009 recession, when it exceeded 0.75, the peak in the sample period. After this peak, profit efficiency decreased consistently until reaching 0.60 at the end of the sample”, completes the document.
The BC remembers that times of crisis can force financial institutions to increase their efficiency. Even so, the authority assesses that there are challenges in maximizing profits, especially in a scenario of increased competition in the sector.
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