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Restructuring in the banking industry withimplications for Europe

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  • Arnoud W. A. Boot

    (University of Amsterdam)

Abstract

Set against the background of a rapidly consolidating financial sector, this paper explores the main forces that are driving this process. Acknowledging that the search for scale and scope economies is one of them, the paper emphasises that the empirical evidence in support of such economies is mixed, at best; while scale and scope economies exist, in principle, they are difficult to attain in practice. The paper considers strategic positioning in an uncertain and rapidly changing environment a more important factor: by expanding scope (and scale), financial institutions acquire options to venture into new activities. An implication of this strategic-option explanation is that consolidation, scope expansion in particular, will partially unravel as and when uncertainty declines and competition forces financial institutions to discover their true competitive advantages.

Suggested Citation

  • Arnoud W. A. Boot, 2003. "Restructuring in the banking industry withimplications for Europe," EIB Papers 5/2003, European Investment Bank, Economics Department.
    • Handle: RePEc:ris:eibpap:2003_005
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    References listed on IDEAS

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    Cited by:

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    2. Hassanzadeh , Ali, 2009. "A Survey and Measuring Efficiency Level in the Country's Banking System, and the Effective Factors," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 5(1), pages 36-64, December.
    3. Erotokritos Varelas, 2015. "Number of Banks, Public Debt, and Workable Competition," Review of Economics & Finance, Better Advances Press, Canada, vol. 5, pages 41-51, February.
    4. Nguyen, Thi Lam Anh, 2018. "Diversification and bank efficiency in six ASEAN countries," Global Finance Journal, Elsevier, vol. 37(C), pages 57-78.
    5. Tran, Dung Viet & Hoang, Khanh & Nguyen, Cuong, 2021. "How does economic policy uncertainty affect bank business models?," Finance Research Letters, Elsevier, vol. 39(C).
    6. Andriakopoulos, Konstantinos & Kounetas, Konstantinos, 2019. "The impact of large lending on bank efficiency in U.S.A," MPRA Paper 96036, University Library of Munich, Germany.
    7. Manh Hung Pham & Nhat Minh Nguyen, 2023. "Bank funding diversity, risk and profitability: Evidence from Vietnam in the context of the Covid-19 pandemic," Cogent Business & Management, Taylor & Francis Journals, vol. 10(1), pages 2191305-219, December.

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    More about this item

    Keywords

    Financial sector; scale and scope economies; Financial Institutions;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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