Empirical Research On Bank Performance Evaluation Albanian Banking System

Banking system weaknesses, even in developed or developing countries can threaten its financial stability. Referring to the latest financial development around the world the need to improve the financial system soundness has paid international attention nowadays. Albania as a country in which financial system is based on financial institutions has faced various situations domestic or foreign sources. Albanian banking system represents almost 90% of the overall financial system, that's why we paid attention to this sector. During the study period banking system in Albania was increasing and developing rapidly. The need for more in-depth analysis and supervision is required in this situation. Even why supervisory and regulatory authorities monitor evenly the stability of the banking system through their traditional tools, it is important to stress that bank evaluation first must be oriented toward their internal processes. We try through this study to evaluate the efficiency in the banking system in Albania using a combination of non-parametric approaches. There are a huge number of studies based on bank performance evaluation, though using usually financial ratios. Non- parametric approaches are not widely applied in European countries even in Balkan countries as well. This study aims to shed light on a new point of view on bank performance evaluation and to offer to bank managers and supervisory authorities a complementary tool. The study is performed first using data from the Annual Reports of each bank understudy from 2006 to 2015 and later was extended to five more years. The results show a huge difference the last five years, mainly in large banks which in some cases have been enlarged by new acquisitions in the domestic market and due to bank concentration.