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Bank Competition in the EU: How Has It Evolved?

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  • Laurent Weill

    () (LaRGE Research Center, Université de Strasbourg)

Abstract

Economic integration on the EU banking markets is expected to favor competition, which should provide economic gains. However, even if there is a commonly accepted view in favor of enhanced bank competition during the last decade, no study has been performed in the 2000s showing this trend. In this paper, we aim to fill this gap by measuring the evolution of bank competition in all EU countries during the 2000s. We estimate the Lerner index and the H-statistic for a sample of banks from all EU countries. We provide evidence of a general improvement in bank competition in the EU, even if cross-country differences are observed in the pattern of the evolution of bank competition. We check whether convergence in bank competition has taken place on the EU banking markets, by applying ? and ? convergence tests for panel data. We show convergence in bank competition. These findings are also observed with standard competition measures (Herfindahl index, profitability indicators). We thus support the view th at bank integration has taken place in the European Union.

Suggested Citation

  • Laurent Weill, 2011. "Bank Competition in the EU: How Has It Evolved?," Working Papers of LaRGE Research Center 2011-04, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
  • Handle: RePEc:lar:wpaper:2011-04
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    banking; competition; European integration;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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