Banking Efficiency During the Financial Crisis Period

This paper examines the performance of banks in the Turkish banking system over the period 2001-2002. The goal of the analysis is to quantify the impact of restructuring program on the banking efficiency. Using the stochastic frontier approach, efficiency scores were estimated for each bank in the sample. The results indicate that the mean cost efficiency improved significantly between 2001 and 2002. The results also indicate that private banks are the most cost efficient in 2002. There is evidence that large banks operate more cost efficiently and furthermore, there is a substantial difference in scale economies between small and large banks. Large banks show significant diseconomies of scale while small ones show significant scale economies.