The Measurement, Control and Management of Operating Costs in Banks

In order to achieve profit goals, in a situation of growing competition, and with a decreasing interest rate spread, it is becoming increasingly important for banks to optimise their cost performance. The first requisite for this is to have a reliable, analytical system of cost measurement, especially for those costs which are difficult to determine, like the indirect operating costs. Traditional techniques for doing this appear to be full of gaps. This study proposes the adoption of new approaches, which have grown up in an industrial environment, for analysing and measuring costs: activitybased costing, activity-based management, process costing and management. An example of these techniques is given, with reference to a specific company environment, and a case study. The example enables the presentation of the advantages of the new techniques, and a way of being able to evaluate their costs and benefits, with a view to implementing them in practice. Adopting an activity based approach and, from this, one related to processes, which is its logical progression, also means having more effective and intelligent control of them. Thus the goal of optimising them can be achieved without resorting to indiscriminate cost cutting, which is often damaging to the business. Jel Codes: G21 – L23 – M11 – M12 – M14