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Market Power In European Banking Sectors

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Author Info
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)

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

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Find related papers by JEL classification:
D40 - Microeconomics - - Market Structure and Pricing - - - General
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. 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. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. Suominen, Matti, 1994. " Measuring Competition in Banking: A Two-Product Model," Scandinavian Journal of Economics, Blackwell Publishing, vol. 96(1), pages 95-110.
  4. Shaffer, Sherrill, 1989. "Competition in the U.S. banking industry," Economics Letters, Elsevier, vol. 29(4), pages 321-323. [Downloadable!] (restricted)
  5. Robert M. Adams & Lars-Hendrik Roller & Robin C. Sickles, 2002. "Market power in outputs and inputs: an empirical application to banking," Finance and Economics Discussion Series 2002-52, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  6. 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. [Downloadable!] (restricted)
  7. Inês Cabral & Frank Dierick & Jukka Vesala, 2002. "Banking integration in the euro area," Occasional Paper Series 06, European Central Bank. [Downloadable!]
  8. 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.
  9. Corvoisier, Sandrine & Gropp, Reint, 2002. "Bank concentration and retail interest rates," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2155-2189, November. [Downloadable!] (restricted)
    Other versions:
  10. Shaffer, Sherrill & DiSalvo, James, 1994. "Conduct in a banking duopoly," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1063-1082, December. [Downloadable!] (restricted)
    Other versions:
  11. 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. [Downloadable!] (restricted)
  12. Shaffer, Sherrill, 1993. "A Test of Competition in Canadian Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 49-61, February. [Downloadable!] (restricted)
    Other versions:
  13. Michele Manna, 2004. "Developing statistical indicators of the integration of the euro area banking system," Working Paper Series 300, European Central Bank. [Downloadable!]
  14. Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2259-2281, September. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jacob A. Bikker & Laura Spierdijk & Paul Finnie, 2006. "The Impact of Bank Size on Market Power," DNB Working Papers 120, Netherlands Central Bank, Research Department. [Downloadable!]
  2. Maudos, Joaquin & Fernandez de Guevara, Juan, 2006. "The cost of market power in banking: social welfare loss vs. inefficiency cost," MPRA Paper 15253, University Library of Munich, Germany. [Downloadable!]
  3. Juan Ayuso & Jorge Martínez, 2006. "Assessing banking competition: an application to the Spanish market for (quality-changing) deposits," Banco de España Working Papers 0623, Banco de España. [Downloadable!]
  4. Elmer Sterken, 2006. "Competition in the Dutch Mortgage Market," De Economist, Springer, vol. 154(4), pages 587-600, December. [Downloadable!] (restricted)
  5. Jacob A. Bikker & Laura Spierdijk & Paul Finnie, 2007. "The Impact of Market Structure, Contestability and Institutional Environment on Banking Competition," Working Papers 07-29, Utrecht School of Economics. [Downloadable!]
  6. Laurent Weill, 2008. "Convergence in Banking Efficiency Across European Countries," Working Papers of LaRGE (Laboratoire de Recherche en Gestion et Economie) 2008-07, Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg (France). [Downloadable!]
  7. Jacob A. Bikker & Laura Spierdijk & Paul Finniez, 2007. "Stock market performance and pension fund investment policy: rebalancing, free float, or market timing?," DNB Working Papers 156, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  8. Carbo Valverde, Santiago & Fernández de Guevara y Rodoselovics, Juan & Humphrey, David & Maudos, Joaquin, 2009. "Estimating the intensity of price and non-price competition in banking," MPRA Paper 17612, University Library of Munich, Germany, revised 2009. [Downloadable!]
  9. Francisco Pérez García & Joaquín Maudos Villarroya & Juan Francisco Fernández de Guevara Radoselovics, 2003. "Integration And Competition In The European Financial Markets," Working Papers. Serie EC 2003-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
    Other versions:
  10. Fungacova, Zuzana & Weill, Laurent, 2009. "How market power influences bank failures: Evidence from Russia," BOFIT Discussion Papers 12/2009, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  11. Fernandez de Guevara, Juan & Maudos, Joaquin, 2009. "Regional Financial Development and Bank Competition: Effects on Firms' Growth," MPRA Paper 15256, University Library of Munich, Germany. [Downloadable!]
  12. Sherrill Shaffer, 2008. "Financial Performance Of Small Business Loans: Indirect Evidence," CAMA Working Papers 2008-28, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
  13. Allen Berger & Leora Klapper & Rima Turk-Ariss, 2009. "Bank Competition and Financial Stability," Journal of Financial Services Research, Springer, vol. 35(2), pages 99-118, April. [Downloadable!] (restricted)
    Other versions:
  14. Liliana Solís & Joaquín Maudos Villarroya, 2007. "Deregulation, Liberalization And Consolidation Of The Mexican Banking System: Effects On Competition," Working Papers. Serie EC 2007-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  15. Amparo Nagore & Joaquín Maudos Villarroya, 2005. "Explaining Market Power Differences In Banking: A Cross-Country Study," Working Papers. Serie EC 2005-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  16. Fernandez de Guevara, Juan & Maudos, Joaquin, 2007. "Regional financial development and bank competition: effects on economic growth," MPRA Paper 15255, University Library of Munich, Germany. [Downloadable!]
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