EFFICIENCY OF THE BANKING INDUSTRY –RELATIONSHIPS AND DEPENDECIES
BULGARIA, ALBANIA - COMPARATIVE STUDY

Senior Dr. Elena Stavrova
Economics Faculty,
SWU "Neophyte Rilski" - Blagoevgrad
Summary
The financial sector has an important role in the process of allocation of financial resources in the economy. Disruption of this movement and its limitation for any reason, its failure would trigger an acute need for resources to invest in the economic system on the one hand and the surplus of free resource accounts, and thus unjust and inefficient growth so-called. "Total savings to society." Thus the efficiency of the banking industry is closely related to the positive development of the economy as a whole.
Analysis of international experience defined as determining the application of a number of methods and systems derived from authentic performance level and to explore the causal relationships and connections stohasticity and relativity of the results.
As a benchmark used official statistics announced by the central banks of Bulgaria and Albania, as well as databases of European institutions.
Keywords: global economic crisis, the banking system efficiency, performance factors.

Introduction
Effective functioning of the financial system and its components play an especially important role for development and orderly functioning of the real sector. One of its main functions is to enable the access to financial resources to business accumulated free circulation of financial resources and community here - realizing the close connection and relationship between the state, "Effective Banking Sector", in additional income for savers - and result - stable state public finances. The level of economic agents ineffective functioning of the banking sector is reflected in the extra cost of financial operations, realizing variation from that formed due to supply and demand. This state of the financial services market can be dismissed economic agents to seek outside financial services national financial system, which would have a very adverse effect on the overall growth rate of aggregate output. The crucial problem in the global financial crisis when the dynamic macroeconomic environment is constantly provoking and orderly functioning of banks and their ability to generate income after a significant portion of their customer base suffers the effects of the crisis and limit the parameters of financial intermediation. Changes in banking regulation designed to limit the risks diverse range of proven complementary effect on the change in philosophy and geography of the banking business. Traditional function of providing liquidity, different times to maturity st receivables and payables is accompanied by measures for risk management and implementation of financial innovation.
The process of "financialisation" of social relations find expression through:
1.Zasilenata financial intermediation role of banks as a major source of resources for expanded reproduction;
2. Increase assets of the financial sector and its relationship with growth in gross domestic product;
3. Improved levels of leverage (measured as debt / GDP ratio).
All these features are often multidimensional controversial, influence on the behavior of bank agents. Recapitalization  banks provoke them to take more risks than they would traditionally suffered, which strains their assets increased demand for credit in the period before the crisis and competition between banks put in a position to continually innovate its product range with the only goal ascending process of lending to not reduced pace. "Plenty" of resources that banks operate in that period artificially lower the price, without the price to include the effects of the implementation of significant risks.
The combined effect of all these factors in varying degrees and at different stages of time proved sufficient for the enhanced role of bank intermediation and changes the model to carry out banking business. The effects of the interaction of banks in the system has dedicated his research Haldane (2009)[1], reaching the conclusion that several external factors proved decisive influence on changes in systematic interaction between the components of the financial system, in particular between banks - namely increased parameters of derivatives trading, increased links between institutions as a result of globalization processes and the role of banking deregulation. These complex relationships between agents with similar business models operating a motoring their behavior extremely difficult.
In the financial area united with crucial question as to the effective operation of commercial banks in a changing environment. Stimulating and limiting the impacts of the specific characteristics of the banking industry, the factors resources and legal and regulatory framework.
Effective operation of the banks is a function of the dynamic processes of concentration of bank capital, factor conditions and customer base and subject to examination by the application of various methods and techniques of economic analysis.
The results of the monitoring process can be quantified as:
- Customer - to improve the quality characteristics of the offered bank products and services;
- The bank - improving financial performance;
for the audience - the redistribution of financial resources e economic space in search of adequate market returns. Saturated with a significant number of competing with each other financial sector stakeholders pursues eliminate variations in performance and cost of the globalized financial markets, Europe and reach the levels of the first-wave accession to the European Union.
The study of the efficiency level of banks stands the attention of researchers, bank managers and investors
Today, for the purposes of economic analysis applied considerable number of concepts for research and evaluation of effectiveness.
Experience has formulated two types of efficiency: productive efficiency and allocative efficiency. This classification was first proposed by British economist M.J. Farrell. in 1957, who in his article titled "Measuring productive efficiency", first introduced the concept of "operational effectiveness." same operational efficiency divided into two components:
(1) technical or productive efficiency (technical efficiency);
(2) efficient allocation (allocative efficiency).
The first describes a method to maximize the outcome of the process of circulation for a resource.
The second is minimized using a combination of resources for a given level of output. In our study, we examine the technical efficiency and allocative efficiency. As an indicator of inefficiency is the difference between acting and real 100% quality indicator expressed as a percentage.
Banking efficiency is a topic worthy of attention, and it is especially valuable and important research in the context of the ongoing processes in emerging markets. In economies where capital and debt markets are still undeveloped, the main channel for economy savings are inflow through the banking system. Efficiency of banks is an indicator of the efficiency of financial intermediation process by combining all stages of movement from savers to investors. Moreover, the banking sector of developing economies is facing strong competition resulting the globalization of the financial system. While the trend in deregulation and global competition is limited for the next few years as a result of the financial crisis requires stabilization of the rate of exit from the economic crisis. Individual banks will be interesting to learn if they are other criteria to pursue or lagging in need of improvement. In general finding is that inefficiency costs down over time and convergence clusters defined by a small set of variables to control. Price inefficiency cost is directly related to the number of branches of the bank.
Factors determining the efficiency of the banking system.
1. The structure of the financial system.
The hypothesis of efficient structured financial system claims that more effectively operate high share of the banking market and higher market concentration. In their research Berger (1995)[2] and Berger and Hannan (1997) [3]explore how positive the impact of the market structure of the financial markets of the United States for its effective functioning. Presented their results do not provide conclusive evidence of a direct link between two structural components analyzed, and the financial system.
Research on the relationship between the effective functioning of the 11 countries in Europe in the context of the structure of financial market conditions in which they operate explore Goldberg and Ray (1996)[4] and the efficiency levels vary widely.
To study the level of risk due to the distribution of market shares between banks will be used coefficient Herfindeil-Hirschman Index (Herfindahl-Hirschman Index)[5] and Simple Concentration Ratio (CRx) the meaning of which is that an industry with few competitors will be higher degree of concentration, while a lower degree of market concentration is distributed among many smaller market shares.
Herfindeil-Hirschman index (Herfindahl-Hirschman Index) and CRx (Concentration Ratio) is generally accepted measure of market concentration. Is calculated by the formula
N
H = Σ S i2
i = 1

where Si is the market share of the number of i-banks, and N is the number of banks. Demirgyuk-Kunt and others (2004)[6] offer a concentration in financial markets is measured as the share of banking assets of the three largest commercial banks in the banking system.
Although similar in methodology Harfindeyl Hirschman index is a widely used in conducting comparative studies due to the possible inclusion of a greater number of banks and more accurate comparative studies.
2. Banking regulation and supervision.
There are rrepresented  a  three system’s important variables  for the efficiency of the financial system:
- Restrictions on inclusion of new entrants - presumably actively working system of restrictive measures against the entry of new market participants will increase the concentration of the banking market. Such restrictions would strengthen the role of effectively functioning banking institutions to those who work at a lower level of efficiency. Measurement of this indicator can be done by the number of rejected applications for a license for banking operations. Such a process has been made in countries under market change in the banking sector where banks took Western Europe with strong positions in international markets. Offering the benefits of global business, they took a dominant position in the supply of bank products packages for economic agents operating in a global market environment.
- Restrictions on banking operations performed and provided banking services. As such can be defined insurance operations, transactions securities markets, mortgage operations and ownership of shares by non-financial companies. An analysis of research in this area again produced conflicting results, giving a clear and explicit assessment of whether such operations affect positively or negatively the performance of banks. Klaesens and Liyvan (2004) [7]prove his thesis that banking markets which operate in a highly regulated environment is characterized by a lower level of competitiveness will enable efficient banks earn extra from increased market share and thus reduce market positions less efficient rivals. Can be realized and the alternative scenario - set restrictive conditions to reduce the concentration, which will increase the specialization of banking institutions in the provision of certain services and thus operate at a competitive contest with major banks in the market.
- The system of deposit insurance as a factor destabilizing the financial discipline of the market participants. High levels of regulation by the State Deposit Insurance initiated processes of higher risk of abuse because of lack of control, and hence the possibility of insolvent banks and systemic crises. The influence of the system guarantee and deposit insurance is a function of the following conditions: government deposit insurance, guarantee deposits in foreign currency, guaranteeing interbank deposits, mandatory inclusion in the scope of deposit insurance, no ceiling on guaranteed amounts. The combination of these factors initiate the conditions for making decisions on the brink of moral and involvement in criminal schemes.
The place of supervision as a factor for the effective functioning of the banking system is in direct relation to the powers of the authorized state authority to influence banks to mitigate the risks borne by them. Basel 2 - in terms of external supervision of banks and Basel 3 - in terms of self-monitoring (independent internal) supervision of banks regulations regarding policy stable behavior of banks. The complementarity of the two surveillance - increased external oversight to promote effective behavior and increased self-surveillance - where little regulation of the market environment is a prerequisite for functioning markets offering different conditions.
3. Institutional infrastructure
For effective functioning of the banking system is an important contribution and institutional infrastructure. Effective institutions working right system to ensure compliance with contractual discipline, while conversely preventing the development of effective market relationships between banks and their customers. La Porta  (1998)[8] share the findings of his study that the real market relations in January
exist in terms of the financial market, which has a system for ensuring the rights of the holders of minority shareholdings. The lack of safeguards to protect the rights of owners of shares dysfunctional judiciary and unstable control institutions to further delay the development of market positioning principles of financial systems of the countries in transition.
4. Ownership Structure Determining the level of efficiency of the banking system is the ownership structure of banks" capital. State, foreign or domestic capitals with different levels of representation are subject to restrictions or liberalized entry into the banking system. Free entry of capital contributes to the concentration of resources and hence resource advantage to the effects.
Banking systems in Bulgaria and Albania to the global financial crisis
The way that the two countries - Bulgaria and Albania, choosing the path of democratic development, we had to walk the last two decades was never easy .. Complex and difficult evolution was carried out both in the organization and in the development of the social structure of society. The limited size Balkans area was the scene of ethnic, economic and social processes, subject to the processes of development and democratization and market economy. Different degrees of openness of the economies of the peninsula differentiate to some extent the effects of the financial and economic crisis.
The effects of the global economic crisis on the economies of the region are expressed primarily in reducing the inflow of foreign capital so necessary for modernization of the real sector. Financial stability policies conducted by governments are segmented to ensure central bank independence and financial discipline on the use of limited public resources for the issuance of debt. These policies are targeted to improve the investment climate, to provide certainty to investors, which will allow the other countries to finance its trade deficit, caused by the growth of domestic demand.     Тabl. № 1 Current Balance Account ( % from GDP)

Year/   country	2005	2006	2007	2008	2009	2010
Аlbania	-6,1	-5,644	-10,371	-15,206	-14,03-	10,11
Bulgaria	-11,666	-17,573	-30,275	-23,262	-9,97	-2,273

 

Sources:www.economywatch.com Although economic growth was greatly reduced and funded exclusively by the national capital - savings and loan bank. (Table № 1) Табл. № 2 Gross National savings ( % from GDP)“

Year/   country	2005	2006	2007	2008	2009	2010
Albania	22,829	23,566	19,059	17,121	15,059	15,048
Bulgaria	16,054	14,586	16,658	13,548	15,236	24,139

 

Sources:www.economywatch.com Banking systems in Bulgaria and Albania have made significant growth in 2008. Time after this period is marked by a decline in the price of securities the banks - investors major banking systems in both countries.  Movement of foreign investments between national banking systems play a stabilizing role in the local banking system and promote efficient investment of available resources in the global economic system. Effects of movement in the banking sector cannot be assessed only through credit - they can affect the improvement of regulatory discipline, stimulate investment and hence - economic growth and prosperity of the nation of the host country. Investment in the banking sectors of Bulgaria and Albania are reflected by increased foreign banks national capital to total bank capital in the following table. № 3. Табл. № 3: Share of international banking capital as a % from gross banking capital.

Year/   country	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
Bulgaria	46	44	48	54	54	54	61	70	67	67	67
Albania	63	75	75	75	70	73	82	77	85	83	83

 

Sources: www.bis.org Tables 4 and 5 shows a dynamics to the most important indexes of efficiency of both banking systems. Tabl. № 4  ROA

Year/   country	2004	2005	2006	2007	2008	2009	2010	2011
Bulgaria	2,12	2,05	2,88