The application of macroprudential policy tools to affect concentration in the Polish banking sector

Banking sectors in particular EU Member States are characterized by different profitability and concentration. In the literature there are divergent views on the appropriate concentration level from the perspective of supervisory authorities, consumers or banks themselves. However, the research carried out for Poland shows that there is positive correlation between concentration and profitability. Moreover, since 2009 a wave of mergers and acquisitions has occurred in the Polish banking sector, which is detrimental to consumers. This conclusion has been drawn from the Lerner index values that have been computed owing to the econometric model with transcendental logarithmic function for the total cost. Thus, if concentration is too high, the supervisory authorities could consider preventing further mergers or acquisitions using new macroprudential policy tools, instead of old administrative ones. Especially important here is the capital buffer that is set on other systemically important institutions. It can be accompanied by the systemic risk buffer. Nevertheless, the results of the comparative analysis show that diverse solutions are currently applied across EU Member States.