Total and Financial Cost Efficiency in Spanish Savings Banks

Efficiency can be measured by applying different methodologies from two principal groups: parametric1 and nonparametric.2 There is no consensus on the best method of determining the production frontier or on the unit of best practice to measure relative efficiencies; the approaches used most often to evaluate the efficiency of financial institutions differ in the assumptions made about the shape of the frontier, the treatment of random error and the distributions assumed for inefficiency and random error.