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- Adding value to bank branch performance evaluation using cognitive maps and MCDA: a case studyPublication . Ferreira, F. A. F.; Santos, Sérgio Pereira dos; Rodrigues, Paulo M. M.Bank branch performance evaluation is a difficult endeavour. Some of the main reasons for this difficulty are the complexity inherent in the variety of aspects considered in the evaluation, and the multiple and conflicting interests of the different stakeholders involved. In this paper, we show how cognitive mapping and measuring attractiveness by a categorical-based evaluation technique can be used to support the evaluation of bank branches through the development of multidimensional performance evaluation systems, and to deal explicitly with the trade-offs between the different dimensions of performance and interests of different stakeholders. A case study is discussed where these techniques are used in a constructive way, making the learning activity easier and introducing transparency in the decision-making process. The strengths and weaknesses of the integrated use of these two operational research techniques in this context are also discussed.
- An AHP-based approach to credit risk evaluation of mortgage loansPublication . Ferreira, F. A. F.; Santos, Sérgio Pereira dos; Dias, V. M. C.Mortgage loans for home purchase require careful analysis by all parties involved in the transaction, and credit-scoring is usually adopted to assist the decision process. From a credit institution standpoint, credit-scoring for mortgage loan risk evaluation becomes even more important in scenarios of economic turbulence and recession, primarily because of the severe restrictions imposed on credit availability that result from reduced access to both money and debt markets and subsequent decreasing liquidity. Employing an AHP – Analytic Hierarchy Process – based approach in the creditscoring system used by one of the major banks in Portugal, this study proposes a methodological framework conceived to adjust trade-offs among evaluation criteria and provide decision makers with a more transparent mortgage risk evaluation system. Practical implications of our framework are also discussed.
- Assessing credit risk of mortgage lending using MACBETH: a methodological frameworkPublication . Ferreira, F. A. F.; Santos, Sérgio Pereira dos; Marques, C. S. E.; Ferreira, J. J. M.Purpose - Considered the largest investment for most households, buying a house requires careful and transparent analysis by all parties involved in the transaction. The aim of this paper is to propose a methodological framework allowing for the readjustment of trade-offs among risk evaluation criteria, considered of extreme importance in the lending decision process of mortgage loans. Design/methodology/approach – Multiple criteria decision analysis (MCDA) has proved over the years to be effective and versatile in handling compensations among criteria. Measuring attractiveness is applied by a categorical based evaluation technique (MACBETH) to a pre-established structure of credit-scoring criteria for mortgage lending risk evaluation. This pre-established structure is currently used by one of the largest banks in Portugal. Findings – The framework allowed the authors to provide the credit experts who participated in the study with a more informed, transparent and accurate mortgage-lending risk-evaluation system. The sensitivity and robustness analyses carried out also helped in promoting discussion and supporting the readjustments made. Research limitations/implications – The study shows the usefulness of using the MACBETH approach to assist credit analysts in making better informed decisions, and opens avenues for further research. However, due to the dependence on the participants involved, extrapolations without proper caution are discouraged. Practical implications – The credit analysts who participated in this study considered the framework more discerning in terms of Basel directives. Originality/value – The integration of MACBETH and credit-scoring mechanisms holds great potential for risk assessment and decision support. No prior work reporting the application of MACBETH in terms of mortgage-lending risk-evaluation is known.
- A multiple criteria framework to evaluate bank branch potential attractivenessPublication . Ferreira, F. A. F.; Spahr, R. W.; Santos, Sérgio Pereira dos; Rodrigues, Paulo M. M.Remarkable progress has occurred over the years in the performance evaluation of bank branches. Even though financial measures are usually considered the most important in assessing branch viability, we posit that insufficient attention has been given to other factors that affect the branches’ potential profitability and attractiveness, such as: location features, trade area characteristics and facilities management. Based on the integrated use of cognitive maps and multiple criteria decision analysis, we propose a framework that adds value to the way that potential attractiveness criteria to assess bank branches are selected and to the way that the trade-offs among those criteria are obtained. This framework is the result of a process involving several directors from the five largest banks operating in Portugal, and follows a constructivist approach. Our findings suggest that the use of cognitive maps systematically identifies previously omitted criteria that may assess potential attractiveness. The use of multiple criteria techniques clarify and add transparency to the way trade-offs are dealt with. Advantages and disadvantages of the proposed framework are also discussed.