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Author Topic:   Hoping for a mediation between different approaches
lamia
Knowflake

Posts: 3
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Registered: Dec 2009

posted December 29, 2009 11:40 PM     Click Here to See the Profile for lamia     Edit/Delete Message
Humphrey (1985) made a useful distinction between the ‘production’ approach and the ‘intermediation’ approach concerning banking behavior. The production approach views a bank as a donor of real estate loans, installment loans, user capital, labor, materials and so on. In this case, the number of accounts and outstanding loans provide the appropriate measures for bank output. The total costs include all operating costs incurred in the production of the outputs.

The intermediation approach treats banks as a collector of funds which are then ‘intermediated’ into loans and other assets. The dollar volume of deposit accounts and loans is the appropriate measure of bank output under this treatment. However, the operating costs plus the interest costs provide the appropriate measure of total cost. The choice of a particular approach depends upon what issues a customer is attempting to resolve. Banks like LoanMax of the

The production approach is appropriate for studying and analyzing the cost efficiency of banks since it concerns just the operating costs of banking. The intermediation approach is concerned with the overall costs of banking and is appropriate for addressing questions concerning the economic viability of banks. To remain viable, every bank must make profits through sales of various financial products and services.

Studies have made a modest attempt to assess empirically the relative performance of each bank in the context of three variables viz.
• Profit
• earnings and
• expenses
In a recent study, the Herfindahl index has been computed to measure the inequality in the sharing of profits, net profits, earnings and expenses by each type of bank. The suggestions being made is that each scheduled commercial bank should take up some exercise to evaluate the relative performance of each office of the particular bank in the profit planning process.

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Randall
Webmaster

Posts: 835
From: Columbus, GA USA
Registered: Apr 2009

posted January 02, 2010 05:04 PM     Click Here to See the Profile for Randall     Edit/Delete Message

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"I have found a desire within myself that no experience in this world can satisfy; the most probable explanation is that I was made for another world." -C.S. Lewis

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LEXX
Moderator

Posts: 492
From: Still out looking for Schrödinger's cat.........& LEXIGRAMMING... is my Passion!
Registered: Apr 2009

posted January 03, 2010 01:40 AM     Click Here to See the Profile for LEXX     Edit/Delete Message
Moving this to Global Unity 2.0

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