Competition and efficiency in EU27 banking systems

In our study, we investigate competition in the banking systems of the EU27 as a whole, but also in both old EU member states and new EU member states, in the context of European Union integration and enlargement. Specifically, we construct 2 measures of competition, the Lerner Index and H-statistics, using bank-level data for a panel of 923 commercial banks from the 27 countries that are member states of the EU. The results show a significant increase in competition in new EU members between 2001 and 2006, while in old member states we see a notable decrease in competition between 2005 and 2007. As a whole, competition in the EU27 increases comparatively with 2001, and we consider adoption of the euro and continuing European integration to be the main factors for this issue. Additionally, empirical results provide evidence of convergence in terms of banking competition among the member states of the EU.