COMPARATIVE ANALYSIS OF EXISTING METHODOLOGIES FOR ASSESSING THE EFFICIENCY OF LENDING PRACTICE
DOI:
https://doi.org/10.5281/zenodo.23297386Abstract
A comparative analysis is conducted of existing methodologies for assessing the efficiency of commercial bank lending activities, including financial ratio analysis, the CAMELS rating system, data envelopment analysis (DEA), stochastic frontier analysis (SFA), risk-adjusted return on capital (RAROC), economic value added (EVA), and the integral index approach. These methodologies are evaluated against six criteria using a multi-criteria assessment framework. Based on data from 19 commercial banks in Uzbekistan, approaches relying on individual indicators are compared with an integrated assessment approach. Spearman’s rank correlation coefficient between bank rankings based on the non-performing loan (NPL) ratio and loan portfolio growth is −0.13, while the corresponding coefficient between rankings based on the NPL ratio and the integral index is 0.67. These findings indicate that assessments based on individual indicators may produce divergent conclusions regarding lending efficiency. Based on the research findings, directions for improving the methodology for assessing the efficiency of commercial bank lending activities are proposed.Keywords
lending efficiency, assessment methodology, CAMELS, DEA, SFA, RAROC, integral index, non-performing loans, Spearman’s rank correlationReferences
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