Efficiency analysis for the risk management of Italian saving banks

Savings Banks are part of the European banking-sector, which play a leading role in providing the financial support for the recovery and development of the real economy. SBs are supporting, mainly, local investments being born within a context that had as primary objective the aim to support local economies and being the profit just one (not even a core one) of the purposes. Currently they operate under complete commercial principles. We investigates the efficiency of the Italian SBs while the financial crisis and banks scandals are still ongoing. The measurement and evaluation of the achieved efficiency level is one of the key parameters to monitor in order to ensure continuity of business processes and, consequently, a vital tool for risk management activities. The measure of efficiency is the esteem of the Data Envelopment Analysis, a non-parametric method. The analysis covers 37 Italian SBs during the 2012–2014 period evaluating the efficiency of single DMUs. In the second part, we develop comparison and speculations on SBs efficiency when integrate or not into a bank group from which they borrow managerial experiences and corporate policies. The empirical DEA-based results can be take into account as an early warning for the banking risk evaluation and provide strategic information. To the best of our knowledge, this is the only recent study devoted to the efficiency measurement of the Italian SBs. Moreover, is the only one that use the pre-tax profits as variable able to encompass the traditional operational and non-traditional activities that may have, in years of elevate risks uncertainty, a great economic impact on financial statements. Our study is particularly important because Italian SBs drives the development of local economies focusing on SMEs and families. From a risk perspective, our results can be of special interest to several stakeholders such as bank managers and people of local communities.