An investigation of the performances of regional centres and traditional branches: evidence from Taiwanese banks

There are two banking systems, regional centre and traditional branches, in Taiwan. The regional centre can simplify banks' business and organization by taking some business of branches. In contrast, branches of tradition system have to provide various financial services. Thus, regional centres can produce competitive advantages, improve the work efficiency of staff and reduce business risks. However, regional-centre system also faces new challenges, such as human-resource planning and customers' preference. Could the system of regional centres be better? The issues are seldom studied. Hence, we select 33 sample banks in Taiwan and compare the performances between systems of regional centres and traditional branches using data-envelopment analysis (DEA) method. The results show that the banks that implement the system of regional centres did not exhibit greater efficiency than those that did not implement the traditional system of bank branches. That is the reason why many Taiwanese banks continue to maintain traditional-branch system. Furthermore, most Taiwanese banks, including banks with regional centres and traditional branches, have to decrease their scale to improve their performance. The empirical results validate that many banks overly extended during the period of deregulating financial markets in Taiwan.