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A cross-country comparison of market structures in European banking

Author

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  • Davis, E. Philip
  • De Bandt, Olivier

Abstract

In order to assess the effect of EMU on market conditions for banks based in countries which adopt the Single Currency, we use the H indicator suggested by Panzar and Rosse (1987). Our contribution is to assess results separately for large and small banks, and for interest income and total income as a dependent variable. From a panel of banks over the period 1992-1996, we provide evidence that European banking markets for large banks in the mid-1990s were still characterised by monopolistic competition, as compared to the United States. Regarding small banks, the level of competition appears to be even lower, especially in France and Germany. EMU would therefore imply a notable rise in competition for small banks in France and Germany, as well as an increase in competition for large banks, especially in Italy. JEL Classification: G21, L12

Suggested Citation

  • Davis, E. Philip & De Bandt, Olivier, 1999. "A cross-country comparison of market structures in European banking," Working Paper Series 0007, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:19990007
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    References listed on IDEAS

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    1. E.P. Davis & Sinikka Salo, 1998. "Excess Capacity in EU and US Banking Sectors - Conceptual, Measurement and Policy Issues," FMG Special Papers sp105, Financial Markets Group.
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    Citations

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    Cited by:

    1. Benoît Mojon, 2001. "Structures financières et canal des taux d’intérêt de la politique monétaire dans la zone euro," Économie et Prévision, Programme National Persée, vol. 147(1), pages 89-115.
    2. Calcagnini,G. & Farabullini,F. & Hester,D.D., 2000. "Financial convergence in the European Monetary Union?," Working papers 22, Wisconsin Madison - Social Systems.
    3. Martin Mandel & Vladimír Tomšík, 2011. "Regulace bankovního sektoru z pohledu ekonomické teorie
      [Regulation of the Banking Sector From the Economic Theory´s Point of View]
      ," Politická ekonomie, University of Economics, Prague, vol. 2011(1), pages 58-81.
    4. Gual, Jordi, 2004. "The Integration of EU Banking Markets," CEPR Discussion Papers 4212, C.E.P.R. Discussion Papers.
    5. Franziska Bremus & Claudia Buch & Katheryn Russ & Monika Schnitzer, 2013. "Big Banks and Macroeconomic Outcomes: Theory and Cross-Country Evidence of Granularity," NBER Working Papers 19093, National Bureau of Economic Research, Inc.
    6. Franklin Allen & Laura Bartiloro & Oskar Kowalewski, 2006. "The Financial System of the EU-25," Chapters,in: Financial Development, Integration and Stability, chapter 7 Edward Elgar Publishing.
    7. Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
    8. Diaz, Belen Diaz & Olalla, Myriam Garcia & Azofra, Sergio Sanfilippo, 2004. "Bank acquisitions and performance: evidence from a panel of European credit entities," Journal of Economics and Business, Elsevier, vol. 56(5), pages 377-404.
    9. Gual, Jordi, 2003. "Integration of EU banking markets, The," IESE Research Papers D/504, IESE Business School.
    10. Corvoisier, Sandrine & Gropp, Reint, 2002. "Bank concentration and retail interest rates," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2155-2189, November.
    11. Trivieri, Francesco, 2007. "Does cross-ownership affect competition?: Evidence from the Italian banking industry," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(1), pages 79-101, February.
    12. Mariarosaria Agostino & Francesco Trivieri, 2010. "Is banking competition beneficial to SMEs? An empirical study based on Italian data," Small Business Economics, Springer, vol. 35(3), pages 335-355, October.
    13. 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.
    14. Brissimis, Sophocles N. & Magginas, Nicholas S., 2005. "Changes in financial structure and asset price substitutability: A test of the bank lending channel," Economic Modelling, Elsevier, vol. 22(5), pages 879-904, September.
    15. Livio Stracca, 2003. "The Functional Form Of The Demand For Euro Area M1," Manchester School, University of Manchester, vol. 71(2), pages 172-204, March.
    16. Hong- Jen Abraham Lin, 2013. "Trends for future integration of commercial banking between Taiwan and China after the ECFA," Chapters,in: Economic Integration Across the Taiwan Strait, chapter 4, pages 81-101 Edward Elgar Publishing.
    17. Pablo Alonso González & Irene Albarrán Lozano & Andrea Giuliodori Khalil, 2006. "El Impacto del descenso en los Tipos de Interés sobre el margen financiero de las Cajas de Ahorros españolas," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 0(1), pages 98-136, January.
    18. José García Solanes & Diego Peñarrubia, "undated". "Economic Integration and Banking Mergers Strategies," Working Papers on International Economics and Finance 01-07, FEDEA.
    19. Bernardo Batiz-Lazo & Douglas Wood, 2002. "Strategy, Competition And Diversification In European And Mexican Banking," Industrial Organization 0211013, EconWPA.
    20. Barajas, Adolfo & Steiner, Roberto & Salazar, Natalia, 2000. "The impact of liberalization and foreign investment in Colombia's financial sector," Journal of Development Economics, Elsevier, vol. 63(1), pages 157-196, October.
    21. Boris Hofmann, 2006. "EMU and the transmission of monetary policy: evidence from business lending rates," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 33(4), pages 209-229, September.

    More about this item

    Keywords

    banking; competition; contestability; EMU; panel data analysis;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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