Rationalizing Policy Functions by Dynamic Optimization

We derive necessary and sufficient conditions for a pair of functions to be the optimal policy function and the optimal value function of a dynamic maximization problem with convex constraints and concave objective functional. It is shown that every Lipschitz continuous function can be the solution of such a problem. If the maintained assumptions include free disposal and monotonicity, then we obtain a complete characterization of all optimal policy and optimal value functions. This is the case, e.g., in the standard aggregative optimal growth model.     

Information technology in banking

This paper argues that since the use of information is a fundamental part of all forms of activities, both corporate and private, throughout society the introduction of a new technology for using information inevitably has widespread effects. These effects are particularly far reaching in those service industries, such as banking, the very heart and essence of whose business is the handling of information.A review of the developments so far in the use of the new information technology in payment systems brings out the essential nature of its effects and shows the all-pervasive influence of the form and capability of the technology itself. It tries to illustrate where the benefits are derived and the nature of illusory gains and undesirable effects. An attempt is then made to derive an historical perspective.To try to anticipate future events, current trends in the technology and in the ways in which its use might change, are identified. The change in the technical means by which financial and other information-based services are delivered is seen to be salient feature of these developments and the important influence upon institutional relationships is discussed under the heading of the politics of the technology. Parallels in the introduction of other new technologies are drawn by way of illustration.The final part of the paper tries to develop a broader perspective and sketches out a longer scenario of the development of information technology indicating the major influence which this is likely to exert upon the development of society throughout the world.     

Competition in retail banking

This article analyses the reasons for increased competition in retail banking. The author emphasizes the willingness of his and other banks to respond to the changing requirements of customers and describes innovations in the banking industry. The conclusion suggests how the banks' range of products and services may develop in the future.     

Shaping the future of retail banking

The first half of this article considers recent developments in the retail banking market and, with the aid of tables, describes the present state of the market. Emphasis is placed on the increased competitiveness of the market with more institutions involved in providing more products than ever before, and with more attention being focused on the unbanked sector of the population. The second half of the article considers the factors which are most likely to influence the ruture development of the market—both external influences such as the political, economic and regulatory environment and factors which lie more directly under the control of the banks themselves, such as the introduction of new services and branching policy. The article ends by stressing the scope for individual banks to pursue distinctive policies in this market in future.     

Branch banking in the year 2000

The topic of branch banking in the United States in the year 2000 is obviously one that has been in the minds of California bankers for some time because California is the largest state in the United States to permit virtually unlimited statewide branch banking. It is a topic that must also be in the minds of a large number of European and Asian bankers as well because several non-U.S. banking systems have already established large branch networks in the United States. It is a difficult topic because no one knows precisely what will be the status of branch banking in the year 1990, let alone the year 2000. This article makes some predictions.     

Parametric branch and bound

The paper describes a procedure for mixed integer programming that allows branches to be imposed ‘by degrees’, which can subsequently be revised or weeded out according to their relative influence. It is an adaptive approach in which the branch and bound tree can be manipulated and restructured. The approach also yields measures of the costs of imposing the branches that lead to integer solutions, thus providing a built-in form of sensitivity analysis for evaluating the effect of integer restrictions.     

Personnel policy and manpower planning in banking

Forces of rapid change and strong competition are now operating in the world. Banking with its rapidly changing technology must keep pace with these forces but it must at the same time provide secure and continuous employment for staff. Personnel policy now encompasses manpower planning which is defined as ‘A strategy to acquire, utilize, retain and develop people by formulating and implementing sound manpower policies agreed with employees and their unions’.     

On-line banking: Strategic and management challenges

On-line or electronic delivery is the newest delivery channel to be offered by the retail banks, and there is wide agreement in the industry that this channel will have a significant impact. This article identifies the approaches being adopted by UK retail banks and the strategies underlying those approaches. The management problems and concerns in implementing these services are identified and discussed.     

Integration and efficiency convergence in EU banking markets

Evidence of financial integration and convergence are considered of importance in assessing the outcome of EU deregulation policies aimed at improving the efficiency and performance of banking sectors. This paper evaluates the recent dynamics of bank cost efficiency by means of data envelopment analysis (DEA). Borrowing from the growth literature, we apply dynamic panel data models (GMM) to the concepts of β-convergence and σ-convergence to assess the speed at which banking markets are integrating. We also employ a partial adjustment model to evaluate convergence towards best practice. Results seem to provide supporting evidence of convergence of efficiency levels towards an EU average. Nevertheless, there is no evidence of an overall improvement of efficiency levels towards best practice.     

Competitive strategies in U.S. banking

This paper discusses the planning gaps and needs of U.S. Commercial and Savings Banks which must be addressed as part of a strategic response to the new competitors in the field and the new circumstances.     

Total factor productivity and shareholder returns in banking

This paper examines shareholder value drivers in European banking focusing on the efficiency and productivity features of individual banks. In particular, we analyse the value relevance of bank cost efficiency and total factor productivity (TFP) (in all its components, including technological change, pure technical efficiency change and scale efficiency change) to see how these influence shareholder value creation in European banking. The paper focuses on the French, German, Italian and U.K. banking systems over the period 1995–2002 and includes both listed and non-listed banks. We find that TFP changes best explain variations in shareholder value (measured by market-adjusted returns, MAR, for listed banks and by the ratio of EVA_bkg to invested capital at time t−1 for non-listed banks). In both samples, we also find that technological change seems to be the most important component of TFP influencing shareholder value creation in European banking.     

Dynamic strategies for branch and bound

Some straightforward but unconventional strategies are proposed for implementing branch and bound methods. These include ‘shrinking’ the branch and bound tree and instituting ‘branch reversals’ by reference to the notion of the relative influence of particular branches in the current solution. An attractive feature of these strategies is their ease of implementation, and the fact that they free the solution process from its customary dependency on early branches created on the basis of inadequate information.     

Financial literacy and its influence on internet banking behavior

This paper presents the survey results for financial literacy among Cypriot adults and reports their financial aptitude and behaviour. Additionally, it investigates for the first time the implications of financial literacy on respondents’ usage of digital financial services, particularly internet banking (i-banking). The focus is on Cyprus, a country that experienced an unprecedented financial crisis in 2013 that resulted in a bail-in and an enormous subsequent shrinkage of the banking sector. Cypriot consumers face an ever-increasing need for financial sophistication to effectively utilise and manage digital banking services. Neverthless, financial literacy is still low in Cyprus, whereby only 37.33% of survey respondents showed proficiency in financial knowledge. The findings indicate that there is a statistically positive relationship between the levels of financial knowledge and the frequency of i-banking use. More importantly, financially illiterate consumers appear to report far more often than their financially literate peers the lack of trust in i-banking, as well as a lack of self-confidence in financial and digital skills as the main reasons for not using this service. The findings highlight the interplay between financial literacy and digital proficiency, and their implication on individuals’ use of i-banking services.     

Scale versus specialization: banking strategies after the euro

The euro will transform the competitive landscape of European banking. This paper discusses some of the strategic effects of the euro on banks. In particular, it explores two questions: the rationale behind mergers and acquisitions and the universal banking model. The strategic analysis of the forces for change in banking leads to some conclusions: scale will not be the key success factor in European banking, the euro will increase the role of financial specialists in Europe and the universal banking model will face numerous challenges in the new context.     

Labor-use efficiency in Indian banking: A branch-level analysis

This paper uses data envelopment analysis to measure labor-use efficiency of individual branches of a large public sector bank with a sizable network of branches across India. We find considerable variation in the average levels of efficiency of bank branches across the four metropolitan regions considered in this study. In this context, we introduce the concept of area or spatial efficiency for each region relative to the nation as a whole. Our findings suggest that the policies, procedures, and incentives handed down from the corporate level cannot fully neutralize the detrimental influence of the local work culture across different regions. Most of the potential reduction in labor cost appears to be coming from possible downsizing in the clerical and subordinate staff. Our analysis identifies branches that operate at very low levels of labor-use efficiency and possible candidates for increased supervision and control.     

Competitive conditions in the Central and Eastern European banking systems

The aim of this study is to conduct an empirical analysis of the competitive conditions in the banking systems of Central and Eastern European countries. The well-known model of Panzar and Rosse [1] is implemented on bank-level data over the period 1999–2006. The estimates based on the separate country panels suggest a wide variation in the competitive conditions of the banking systems examined, with some being characterized as (monopolistically) competitive and other as non-competitive. Finally, the results from the full sample indicate that bank revenue is substantially influenced by structural and macroeconomic conditions.     

Foreign Competition for the U.S. banking world

A study of 66 New York branches, agencies and subsidiaries of foreign banks was undertaken to evaluate marketing planning strategies. Opinions and perceptions towards planning and promotional options of key officials of foreign banks were examined. Using canonical statistical techniques the analysis differentiated between the various types of strategies by organizational form as well as by regional affiliation. The survey concluded that while promotional philosophies may be somewhat similar, the planning process differs significantly between branches and agencies.