Productivity, Technology and Skills in Banking: Commercial Lending in Britain, the United States and Germany

This paper reports on a detailed comparison of labour productivity in bank lending to 'middle market' or 'mid-corporate' business customers in Britain, the United States and Germany. It is based on data collected from matched samples of bank lending offices in the three countries. After standardising for average loan size, average lending output per employee-hour in the German sample is found to be some 23% higher than in the US and almost two thirds higher than in Britain. This productivity ranking is left undisturbed by consideration of various indicators of service quality as experienced by borrowers (for example, banks' speed of response to customers' credit requests and the extent to which banks seek to gain a detailed understanding of clients' businesses and their associated credit needs). In the US sample of lending offices, relatively high productivity in the volume-oriented low end of the market is offset by a very labour-intensive approach to servicing credit requests from larger mid-corporate clients (which is designed to maximise sales of a wide range of banking services to the potentially most profitable customers in the mid-corporate size bracket). The British-German productivity gap seems to derive mainly from differences in efficiency in processing business credit requests and from greater use of support staff in Britain than in Germany. Present levels of usage of IT equipment for credit appraisal in the three samples are broadly similar. However, US lending offices began working with personal computers (PC's) earlier than in the two European countries and have therefore had longer to 'streamline' their working methods and procedures to take advantage of the potential efficiency benefits offered by this equipment. In all three samples relationship managers and credit analysts had similarly high levels of formal qualifications and training. The main difference in workforce qualification levels arose from the high proportion of German clerical employees who have undergone a full apprentice training after leaving school (in contrast to their generally less well-trained American and British counterparts).