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Convergence of bank competition in Central and Eastern European countries: do foreign and domestic banks go hand in hand?

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  • Ion Lapteacru

Abstract

Following the massive entry of foreign banks into the Central and Eastern European (CEE) banking markets, one may wonder whether their competitive behaviour differs from that of their domestic counterparts, possibly leading to the segmentation of these markets at the regional and national levels. We find that the competitive behaviour of foreign and domestic banks differs, with foreign banks having less market power until the recent financial crisis and more market power after this financial turmoil. Despite this difference, banks tend to behave similarly, and their market power converges to a similar level. The tendency towards similar competitive behaviour is observed at the regional and national levels and for both foreign and domestic banks, although foreign institutions that enter these markets through the acquisition of domestic banks have slightly more market power. Our findings suggest the regional integration of CEE banking markets and no segmentation between foreign and domestic institutions.

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  • Ion Lapteacru, 2018. "Convergence of bank competition in Central and Eastern European countries: do foreign and domestic banks go hand in hand?," Post-Communist Economies, Taylor & Francis Journals, vol. 30(5), pages 588-616, September.
    • Handle: RePEc:taf:pocoec:v:30:y:2018:i:5:p:588-616
    DOI: 10.1080/14631377.2018.1443242
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    Cited by:

    1. Coccorese, Paolo & Girardone, Claudia & Shaffer, Sherrill, 2021. "What affects bank market power in the euro area? A country-level structural model approach," Journal of International Money and Finance, Elsevier, vol. 117(C).
    2. Yanko Yankov, 2020. "Behavioural Economic Tools as a Way to Increase Customers’ Response in the Banking Sector," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 311-327, June.
    3. Maria Karadima & Helen Louri, 2020. "Bank competition and credit risk in the Euro area, 2005-2017: Is there evidence of convergence?," LEQS – LSE 'Europe in Question' Discussion Paper Series 155, European Institute, LSE.
    4. Maria Karadima & Helen Louri, 2020. "Bank Competition and Credit Risk in Euro Area Banking: Fragmentation and Convergence Dynamics," JRFM, MDPI, vol. 13(3), pages 1-28, March.

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