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The Role of Competitive Framework for Sound Banking Sector in the EU-15 and the EU-12

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Institutional Diversity in Banking

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Abstract

The aim of this chapter is to present the role of market structure and competitive framework in the EU banking sector, with particular emphasis on the change in concentration and competition, in an attempt to determine the relationship between size and competition and risk-taking by banks. The empirical results based on panel data analysis find that the banking sectors with EU-27 are not homogeneous and find asymmetry between performance of EU-15 and EU-12 banking sectors. In fact, we have obtained different results concerning the impact of competition and size on financial stability for EU-15 banks (i.e., large banking sectors) and for EU-12 (i.e., small banking sectors).

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Notes

  1. 1.

    The figure for Luxembourg was approx. 2000 % in 2011 and approx. 3000 % in 2002. See also Bijlsma et al. (2013).

  2. 2.

    The CR5 ratio represents the market share of the five largest banks. The Herfindahl-Hirschman Index (HHI) is calculated as the sum of the squares of the market share of individual commercial banks (e.g., in the net assets). The index can range from 0 to 1, with higher values of the index denoting a greater concentration of the market.

  3. 3.

    An update from Blundell and Bond (1998). In this paper was used one-step GMM estimator.

  4. 4.

    http://www.worldbank.org/en/research , and the St. Louis Fed’s Economic Research website.

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  1. Collegium of Socio-Economics; Economic Institute, Warsaw School of Economics and Narodowy Bank Polski, Niepodleglosci Avenue 162, 02-554, Warsaw, Poland

    Małgorzata Pawłowska

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  1. Małgorzata Pawłowska
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  1. c/o EBES, Cracow University of Economics, Fatih, Istanbul, Turkey

    Ewa Miklaszewska

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Pawłowska, M. (2017). The Role of Competitive Framework for Sound Banking Sector in the EU-15 and the EU-12. In: Miklaszewska, E. (eds) Institutional Diversity in Banking. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-42073-8_8

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  • DOI: https://doi.org/10.1007/978-3-319-42073-8_8

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