ANALYSIS OF COMMERCIAL BANK EFFICIENCY IN INDONESIA USING DATA ENVELOPMENT ANALYSIS (DEA) METHOD AS BANKING PERFORMANCE CONSIDERATION

The Analysis of Conventional Commercial Bank Efficiency in Indonesia using Data Envelopment Analysis (DEA) Method as Banking Performance Consideration. Financial institution, bank and non bank, has become one of the most important aspects in the economy of a country, considering bank as financial institution that has an important role as intermediary between the parties with excessive funds and those who need the funds. To apply the principle of sound banking, bank efficiency rating becomes crucial. It is because efficiency represents the performance of a bank as well as factor that must be considered by a bank to act rationally to minimize the risk faced in its operational activities. This study aims to measure the relative efficiency of conventional commercial banks in Indonesia using Data Envelopment Analysis (DEA) methodology based on intermediation approach. Samples of this study are five major banks in Indonesia, namely Mandiri, BRI, BNI, BCA and BTN. DEA is a non-parametric, deterministic methodology for determining the relative efficiency and managerial performance, based on the empirical data of preselected inputs and outputs of decision making units. DEA allows us to compare the relative efficiency of conventional commercial banks by determining the efficient banks as benchmarks for the inefficient ones with input combinations in other banks relative to the benchmarks.