Quality and its cost within the Maltese commercial banking sector

Abstract

Purpose: Quality is a fundamental element present within the products and services offered by financial institutions. The provision of a high level of quality entails significant expenditure to be incurred by such institutions. This study aims to analyse the concept of quality within the Maltese commercial banking sector and seeks to determine whether such banks report quality costs. Design: A basic understanding of the area of study was achieved through an extensive literature review. The objectives of the study were attained through a series of interviews carried out with six respondent banks. Findings: Banks adopt different quality management and improvement programmes according to their respective needs and size, and hence a common application of methodologies and standards cannot be identified. Only two out of the six participants do identify, quantify and report quality costs, while the remaining respondents do not deem such exercise to be of added value. All banks have agreed that financial results directly impacted from improved quality cannot be identified, but that the quality programmes implemented are deemed to be successful. Conclusions: Banks who have described their quality programmes as successful should reconsider making such a statement since those not reporting quality costs are unaware of the expenditure incurred in managing and improving the level of quality, and since the directly impacted financial results cannot be reported. In not reporting quality costs, banks are missing out on opportunities, are oblivious to activities incurring significant expenditure and are unaware of the existence of problem areas. Implications/Value: Having a quality management and improvement tool is not enough. Quality cost reporting structures should be part of any quality management and improvement programme. Hence banks should also have a costing system which enables them to identify and measure quality costs.