Measuring the efficiency of banks using high-performance ensemble technique

Abstract

AbstractThe importance of technology and managerial risk management in banks has increased due to the financial crisis. Banks are the most affected since there are so many of them with poor financial standing. Due to this problem, an unstable and inefficient financial system causes economic stagnation in both the banking sector and overall economy. Data envelopment analysis (DEA) has been used to examine decision-making units (DMUs) performance to enhance efficiency. Currently, with the rapid growth of big data, adding more DMUs will likely require a large amount of memory and CPU time on the computer system, which will be the biggest challenge. As a result, machine learning (ML) approaches have been used to analyze financial institution performance, but many of them have variances in predictions or model stability, making measuring bank efficiency extremely difficult. For this, ensemble learning is commonly used to evaluate the performance of financial institutions in this context. This paper presents a robust super learner ensemble technique for assessing bank efficiency, with four machine learning models serving as base learners. These models are the support vector machine (SVM), K-nearest neighbors (KNN), random forest (RF), and AdaBoost classifier (ADA) which represent the base learners and their results utilized to train the meta-learner. The super learner (SL) approach is an extension of the stacking technique, which generates an ensemble based on cross-validation. One important benefit of this cross-validation theory-based technique is that it can overcome the overfitting issue that plagues most other ensemble approaches. When SL and base learners were compared for their forecasting abilities using different statistical standards, the results showed that the SL is superior to the base learners, where different variable combinations were used. The SL had accuracy (ACC) of 0.8636–0.9545 and F1-score (F1) of 0.9143–0.9714, while the basic learners had ACC of 0.5909–0.8182 and F1 of 0.6897–0.9143. So, SL is highly recommended for improving the accuracy of financial data forecasts, even with limited financial data.