TECHNICAL EFFICIENCY AND CREDIT RISK ASSESSMENT FOR COMMERCIAL BANKS UNDER BASEL II ACCORD

The study uses data envelopment analysis techniques (DEA) to assess banks' intermediation efficiency, the study contains the construction of 15 separate annual efficiency frontiers, one for each year under study and also the construction of a single grand frontier which envelopes the pooled input-output of all banks in all the years. The results suggest that financial reforms introduced by Egyptian government over the period of the study (1994-2008) have a positive and significant effect on improving technical efficiency of the Egyptian banking sector, also there is a steady decline in the market share of the largest four banks through this time. The findings show that the state owned banks are more technically efficient than private banks and the average X-inefficiency of Egyptian commercial banks is around 47%, this means that Egyptian commercial banks could have achieved the same output using 53% only of the used inputs. And this supports the hypothesis that most of Egyptian banks operate at a non-optimal scale.