Advertisement

Review of Industrial Organization

, Volume 55, Issue 1, pp 27–46 | Cite as

Competition Policy in Banking in the European Union

  • Joaquín Maudos
  • Xavier VivesEmail author
Article

Abstract

We examine the evolution of competition in banking in the EU in its interaction with regulatory developments and the parallel evolution of the application of competition policy in the sector. The crisis of 2007–2009 interrupted the normalization of competition policy in banking that started in the early 1980s; the crisis also reversed some advances in competitive pressure that had occurred due to market integration and the introduction of the euro. Competition policy has to cope post-crisis with a sector that is systemic and subject to regulatory failure. There is ample room to improve both competition and stability in banking by refining regulation.

Keywords

Antitrust Concentration Financial stability Market integration 

JEL Classification

D40 G21 

Notes

Acknowledgements

The authors are grateful for the comments of two anonymous referees, Lawrence J. White (General Editor of the Review of Industrial Organization) and Kern Alexander (the discussant of this paper presented at the Conference “Celebrating 25 years of the European Union Single Market”). We are grateful to Hugo Ferradans and Giorgia Trupia for excellent research assistance. The authors acknowledge financial support from the Spanish Ministry of Economy, Industry and Competitiveness (Project ECO2017-84858-R-AEI/FEDER, UE for Maudos and ECO2015-63711-P for Vives).

References

  1. Baer, H. L., & Mote, L. R. (1985). The effects of nationwide banking in concentration: Evidence from abroad. Economic Perspectives, 9, 3–17.Google Scholar
  2. Barros, P., Berglöf, E., Fulghieri, P., Gual, J., Mayer, C., & Vives, X. (2005). Integration of European banking: The way forward. In Monitoring European Deregulation 3. London: CEPR.Google Scholar
  3. Baso, A., Bon, J., Tasker, B., Timan, N., Walker, M., & Whitcombe, Ch. (2018). Recent developments at the CMA: 2017–2018. Review of Industrial Organization, 53, 615–635.CrossRefGoogle Scholar
  4. Berger, A., & Roman, A. (2015). Did TARP banks get competitive advantages? Journal of Financial and Quantitative Analysis, 50(06), 1199–1236.CrossRefGoogle Scholar
  5. Bikker, J. A., & Spierdijk, L. (2017). Handbook of competition in banking and finance. Cheltenham: Edward Elgar‎.CrossRefGoogle Scholar
  6. Calderon, C., & Schaeck, K. (2016). The effects of government interventions in the financial sector on banking competition and the evolution of zombie banks. Journal of Financial and Quantitative Analysis, 51(04), 1391–1436.CrossRefGoogle Scholar
  7. Campa, J. M., & Hernando, I. (2006). M&As performance in the European financial industry. Journal of Banking & Finance, 30(12), 3367–3392.CrossRefGoogle Scholar
  8. Carbó, S., Humphrey, D., Maudos, J., & Molyneux, P. (2009). Cross-country comparisons of competition and pricing power in European banking. Journal of International Money and Finance, 28, 115–134.CrossRefGoogle Scholar
  9. Carbó, S., & Rodríguez, F. (2007). The determinants of bank margins in European banking. Journal of Banking & Finance, 31(7), 2043–2063.CrossRefGoogle Scholar
  10. Carletti, E., & Hartmann, P. (2003). Competition and stability: What’s special about banking? In P. Mizen (Ed.), Monetary history, exchange rates and financial markets: Essays in honour of Charles Goodhart (pp. 202–229). Cheltenham: Edward Elgar.Google Scholar
  11. Carletti, E., Hartmann, P., & Ongena, S. (2015). The economic impact of merger control legislation. International Review of Law and Economics, 42(6), 88–104.CrossRefGoogle Scholar
  12. Carletti, E., & Vives, X. (2009). Regulation and competition policy in banking. In X. Vives (Ed.), Competition policy in the EU: Fifty years on from the treaty of Rome (pp. 479–497). Oxford: Oxford University Press.Google Scholar
  13. Casu, B., & Girardone, C. (2009). Competition issues in European banking. Journal of Financial Regulation and Compliance, 17(2), 119–133.CrossRefGoogle Scholar
  14. Chiappori, P., Mayer, C., Neven, D., & Vives, X. (1991). The microeconomics of monetary union. London: CEPR.Google Scholar
  15. Claessens, S., & Laeven, L. (2004). What drives bank competition? Some international evidence. Journal of Money, Credit and Banking, 36, 563–583.CrossRefGoogle Scholar
  16. Cruz-García, P., Fernández de Guevara, J., & Maudos, J. (2017). The evolution of market power in European banking. Finance Research Letters, 23, 257–262.CrossRefGoogle Scholar
  17. Danthine, J. P., Giavazzi, F., von Thadden, E. L., & Vives, X. (1999). Monitoring European integration: The future of European banking. London: CEPR.Google Scholar
  18. De Jonghe, O., Diepstraten, M., & Schepens, G. (2016). Competition in EU banking. In T. Beck & B. Casu (Eds.), The Palgrave handbook of European banking. London: Palgrave Macmillan.Google Scholar
  19. Dell’Ariccia, G., & Marquez, R. (2006). Competition among regulators and credit market integration. Journal of Financial Economics, 79, 401–430.CrossRefGoogle Scholar
  20. European Central Bank. (2017a). Financial integration in Europe. May 2017. Frankfurt am Main.Google Scholar
  21. European Central Bank. (2017b). Annual report 2017. Frankfurt am Main.Google Scholar
  22. European Commission. (2005). White paper on financial services policy 20052010 (SEC (2005) 1574). Commission Staff Working Paper Document, Brussels.Google Scholar
  23. European Commission. (2018). State Aid Scoreboard 2018. Overview Tables.Google Scholar
  24. Fernández de Guevara, J., & Maudos, J. (2017). Competition in the European banking markets in the aftermath of the financial crisis. In J. A. Bikker & L. Spierdijk (Eds.), Research handbook on competition in banking and finance (pp. 118–138). Cheltenham: Edward Elgar.CrossRefGoogle Scholar
  25. Gropp, R., Hakenes, H., & Schnabel, I. (2011). Competition, risk-shifting, and public bail-out policies. Review of Financial Studies, 24, 2084–2120.CrossRefGoogle Scholar
  26. Gual, J. (1999). Deregulation, integration and market structure in European banking. Journal of Japanese and International Economics, 12(4), 372–396.CrossRefGoogle Scholar
  27. Kapsis, I. (2012). Competition law and policy for the EU banking sector in a period of increased economic uncertainty. International Journal of Law and Management, 54(4), 284–301.CrossRefGoogle Scholar
  28. Liu, H., Molyneux, P., & Wilson, J.O. (2013). Competition in banking: measurement and interpretation. In A. Bell, Ch. Brooks, & M. Prokopczuk (Ed.), Handbook of research methods and applications in Empirical Finance, (pp.197–215). Edward Elgar Publishing.Google Scholar
  29. Maudos, J., & Fernández de Guevara, J. (2007). The cost of market power in the European banking sectors: Social welfare loss vs. inefficiency cost. Journal of Banking & Finance, 31, 2103–2125.CrossRefGoogle Scholar
  30. Perotti, E., & Suarez, J. (2002). Last bank standing: What do I gain if you fail? European Economic Review, 46(9), 1599–1622.CrossRefGoogle Scholar
  31. Van Rixtel, A., Kok, C., van Leuvensteijn, M. & Bikker, J.A. (2007). A new approach to measuring competition in the loan markets of the euro area. Working Paper Series 768, European Central Bank.  Google Scholar
  32. Vives, X. (1991). Banking competition and European integration. In A. Giovannini & C. Mayer (Eds.), European financial integration (pp. 9–31). Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  33. Vives, X. (1992). The supervisory function of the European system of central banks. Giornale degli Economisti e Annali di Economia, 51(9–12), 523–532.Google Scholar
  34. Vives, X. (2005). Europe banks future on the urge to merge. Wall Street Journal Europe May 13.Google Scholar
  35. Vives, X. (2016). Competition and stability in banking, the role of regulation and competition policy. Princeton: Princeton University Press.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Departamento de Análisis Económico, Edificio departamental OrientalUniversity of ValenciaValenciaSpain
  2. 2.IvieValenciaSpain
  3. 3.IESE Business SchoolBarcelonaSpain

Personalised recommendations