Intermediation, integration and internationalisation: a survey on banking in Europe

This paper provides a survey on recent and current developments in the European banking industry. Traditional banking activities have diminished in relative terms, but banks remain the predominant players in the euro area financial system. Economic and monetary integration in the EU has strongly encouraged internationalisation and concentration. The share of foreign assets and liabilities on the EU banks' balance sheets is still modest but sharply rising. So far, mergers and acquisitions have mainly been of a domestic nature. Informational technology has changed banks' production, products and markets, whereas the Internet may radically change the way banks interact with customers. All these phenomena have strong effects on concentration, competition and efficiency. Finally, we address the question whether the observed consolidation and increased competition might have impaired financial stability.