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  • Cost Income Ratio

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    Madalina Mihai
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    The Cost Income Ratio (CIR) is used to measure the productivity and efficiency of banks, with a higher CIR representing lower productivity and efficiency, and vice versa. The CIR relates a bank's expenses to its operating income over a given period, showing how much was spent to generate one unit of revenue. Consequently, the CIR measures a bank's output relative to its input. A bank's specific business model also has a direct impact on its CIR, with different business models like private banks and universal banks typically having significantly different CIR percentages.

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    CIR

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    Cir

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    The Cost Income Ratio (CIR) is used to measure the productivity and efficiency of banks, with a higher CIR representing lower productivity and efficiency, and vice versa. The CIR relates a bank's expenses to its operating income over a given period, showing how much was spent to generate one unit of revenue. Consequently, the CIR measures a bank's output relative to its input. A bank's specific business model also has a direct impact on its CIR, with different business models like private banks and universal banks typically having significantly different CIR percentages.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    15 views5 pages

    Cost Income Ratio

    Uploaded by

    Madalina Mihai
    The Cost Income Ratio (CIR) is used to measure the productivity and efficiency of banks, with a higher CIR representing lower productivity and efficiency, and vice versa. The CIR relates a bank's expenses to its operating income over a given period, showing how much was spent to generate one unit of revenue. Consequently, the CIR measures a bank's output relative to its input. A bank's specific business model also has a direct impact on its CIR, with different business models like private banks and universal banks typically having significantly different CIR percentages.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 5

    CIR

    Cost Income Ratio

    The discussion about productivity and efficiency


    in banks is mostly based on the Cost Income
    Ratio (CIR), which is also known as efficiency
    ratio.
    A high CIR is equivalent to low productivity and
    low efficiency and vice versa.

    The cost income ratio puts expenses


    (administrative costs) and earnings (operating
    income) of a bank in relation to each other. The
    CIR shows how many Euros
    (or dollars etc.) were needed in a given period
    of time to generate one Euro (or dollar etc.) in
    revenue.
    Consequently, the CIR measures the output of a
    bank in relation to its utilized input.

    CIR depends on business


    model
    Business model: The specific business model of a
    bank has a direct effect on the CIR. Therefore,
    significant differences in the average CIR are the
    result:
    e.g., in 2007:
    private banks: 50.6%,
    multiregion-banks: 49.8%,
    universal banks: 60.1%,
    corporate banks with focus on capital markets:
    79.0%
    (Deutsche Bank, 2008)

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