The Impact Of Cash And Credit Card Debt Crisis To Efficiency Of Bank

Credit and cash cards are the mainstream business of banking institutions in recent years. The purpose of this research is to explore the mutual relations between non-performing loans of cash cards(NPL cash)/non-performing loans of credit card(NPL credit) and the efficiency of Bank.First of all,this study uses Stochastic Frontier Approach to estimate the efficiency of 34 banks in Taiwan from the third quarter of 2004 to the fourth quarter of 2004.Furthermore, according to the simultaneous equations to explore the lead/lag relationship between NPL cash/NPL credit,NPL and the efficiency of Bank,we hypothesize as follows:(1) Over-spending of cardholders.(2) Card issuing recklessly.(3) Banks manage improperly.(4) Moral Crisis.(5) Card-issuing banks with bad luck.The result of this study comes to:(1) In full sample testing,the two hypothesis, over-spending of cardholders and Bad luck,not only occur in the card-issuing banks,but also imply that rising of NPL ration is ahead of the declining Efficiency of Bank.Moreover,NPL credit affects the Efficiency of Bank obviously.(2) In sub sample testing,even if the banks have better efficiency,the banks are unable to avoid high non-performing loans ratio with over-spending of cardholders.Card-issuing banks with bad luck and card issuing recklessly cause worse Cost Efficiency;Card-issuing banks with bad luck and over-spending of cardholders lead to high non-performing loans ratio;Banks with over-spending of cardholders result in lower non-performing loans ratio.