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Market Power In European Banking Sectors

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  • Francisco Pérez García

    ()
    (Instituto Valenciano de Investigaciones Económicas)

  • Joaquín Maudos Villarroya

    (Instituto Valenciano de Investigaciones Económicas)

  • Juan Francisco Fernández de Guevara Radoselovics

    (Instituto Valenciano de Investigaciones Económicas)

Abstract

This study analyses the evolution of market power in the banking sectors of the European Union based on the estimation of Lerner indices. Using a panel of 18,810 observations of the banking industries of Germany, France, Italy, Spain and the United Kingdom during the period 1992-99, the results show substantial differences between countries. The evolution of the Lerner index does not show an increase in the degree of competition within the EU, despite the liberalisation measures implemented in order to create a single banking market. The study discusses the limitations to the interpretation of the Lerner index as an indicator of the degree of competition, and analyses its determining factors. Este trabajo analiza la evolución del poder de mercado en los sectores bancariosde la Unión Europea a partir de la estimación de índices de Lerner. Utilizando un panelde 18,810 observaciones de los sectores bancarios de Alemania, Francia, Italia, Españay Reino Unido durante de periodo 1992-99, los resultados muestran importantesdiferencias por países, siendo los sectores bancarios del Reino Unido e Italia los quepresentan mayores valores del índice. La evolución del índice de Lerner en el periodoanalizado no muestra un aumento en el grado de competencia en el seno de la UE, apesar de las medidas liberalizadoras implementadas con objeto de crear un mercadoúnico bancario. El trabajo discute las limitaciones a la interpretación del índice deLerner como indicador del grado de competencia y analiza sus factores determinantes.A este respecto, la concentración del mercado, el tamaño de las empresas y el riesgoaparecen como variables significativas. En el caso de la concentración, la influencianegativa en el mercado de depósitos y no siendo significativa en el mercado depréstamos permiten rechazar la hipótesis de colusión.

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File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-2002-05.pdf
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 2002-05.

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Length: 27 pages
Date of creation: Mar 2002
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:2002-05

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Keywords: poder de mercado; competencia; sectores bancarios europeos. market power; competition; European banking sectors.;

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References

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  1. De Bandt, Olivier & Davis, E. Philip, 2000. "Competition, contestability and market structure in European banking sectors on the eve of EMU," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 1045-1066, June.
  2. Robert M. Adams & Lars-Hendrik Röller & Robin C. Sickles, 2002. "Market Power in Outputs and Inputs: An Empirical Application to Banking," CIG Working Papers FS IV 02-33, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  3. Joaquin Maudos & Jose Pastor & Francisco Perez, 2002. "Competition and efficiency in the Spanish banking sector: the importance of specialization," Applied Financial Economics, Taylor & Francis Journals, vol. 12(7), pages 505-516.
  4. Corvoisier, Sandrine & Gropp, Reint, 2001. "Bank Concentration and Retail Interest Rates," Working Paper Series 0072, European Central Bank.
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  6. Maudos, Joaquin & Fernandez de Guevara, Juan, 2003. "Factors Explaining the Interest Margin in the Banking Sectors of the European Union," MPRA Paper 15252, University Library of Munich, Germany.
  7. Angelini, Paolo & Cetorelli, Nicola, 2003. " The Effects of Regulatory Reform on Competition in the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 663-84, October.
  8. Inês Cabral & Frank Dierick & Jukka Vesala, 2002. "Banking integration in the euro area," Occasional Paper Series 06, European Central Bank.
  9. Sherrill Shaffer, 1990. "A test of competition in Canadian banking," Working Papers 90-18, Federal Reserve Bank of Philadelphia.
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  11. J.A. Bikker & K. Haaf, 2000. "Competition, concentration and their relationship: an empirical analysis of the banking industry," Research Series Supervision (discontinued) 30, Netherlands Central Bank, Directorate Supervision.
  12. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, December.
  13. DeYoung, Robert & Hasan, Iftekhar, 1998. "The performance of de novo commercial banks: A profit efficiency approach," Journal of Banking & Finance, Elsevier, vol. 22(5), pages 565-587, May.
  14. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  15. Berg, Sigbjorn Atle & Kim, Moshe, 1994. "Oligopolistic Interdependence and the Structure of Production in Banking: An Empirical Evaluation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(2), pages 309-22, May.
  16. Shaffer, Sherrill, 1989. "Competition in the U.S. banking industry," Economics Letters, Elsevier, vol. 29(4), pages 321-323.
  17. Neven, Damien & Roller, Lars-Hendrik, 1999. "An aggregate structural model of competition in the European banking industry," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 1059-1074, October.
  18. Molyneux, Phil & Lloyd-Williams, D. M. & Thornton, John, 1994. "Competitive conditions in european banking," Journal of Banking & Finance, Elsevier, vol. 18(3), pages 445-459, May.
  19. Suominen, Matti, 1994. " Measuring Competition in Banking: A Two-Product Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(1), pages 95-110.
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