Fuzzy Approach in Ranking of Banks according to Financial Performances

Milena Jakšić,Slavko Arsovski,Mirjana Misita,Predrag Mimović,Slaviša Moljević,Danijela Tadić,Aleksandar Aleksić

doi:10.1155/2016/6169586

Abstract

Evaluating bank performance on a yearly basis and making comparison among banks in certain time intervals provide an insight into general financial state of banks and their relative position with respect to the environment (creditors, investors, and stakeholders). The aim of this study is to propose a new fuzzy multicriteria model to evaluate banks respecting relative importance of financial performances and their values. The relative importance of each pair of financial performance groups is assessed linguistic expressions which are modeled by triangular fuzzy numbers. Fuzzy Analytic Hierarchical Process (FAHP) is applied to determine relative weights of the financial performances. In order to rank the treated banks, new model based on Fuzzy Technique for Order Performance by Similarity to Ideal Solution (FTOPSIS) is deployed. The proposed model is illustrated by an example giving real life data from 12 banks having 80% share of the Serbian market. In order to verify the proposed FTOPSIS different measures of separation are used. The presented solution enables the ranking of banks, gives an insight of bank’s state to stakeholders, and provides base for successful improvement in a field of strategy quality in bank business.

Highlights

In an economic theory and practice role of banks can be defined as mediator between the ones with capital surplus and ones in need of capital
The purpose of this study is to propose fuzzy model based on financial performances (FPs) for evaluation bank operating, that is, determining
The Analytic Hierarchical Process (AHP) framework is used for the rating of relative importance of FP

Summary

Introduction

In an economic theory and practice role of banks can be defined as mediator between the ones with capital surplus and ones in need of capital. The problems that can occur in banking sector [1] directly influence the stakeholders as well as the general economy. Respecting this fact, it is very important to ensure and maintain performances of banks in such manner that banks can contribute in sustainable development of each economy country and overcoming crisis. An assessment of bank’s performances, as well as final analysis, needed by both internal and external beneficiaries of information, is very significant for different stakeholders. This is a reason that considered problem has become a topic of research in the last decades

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