Dynamics of Bank Efficiency in the EU and Southern Mediterranean : Is There a Convergence?

Against a background of decades of regulatory reforms aimed at fostering integration, promoting competition, efficiency and productivity growth in the financial industry, both in developed and developing countries, in this MEDPRO Technical Report the authors seek to assess the outcomes of these reform processes on the dynamics of bank efficiency – via the estimation of stochastic meta-frontiers – and convergence for a large sample of countries over the period 1997-2010. For the purpose of this analysis, they divide the sample into four ‘regions': i) northern Europe; ii) eastern Europe; iii) Mediterranean Europe and iv) MENA. In addition, the authors group the countries in two ‘macro areas': northern and eastern Europe and Mediterranean Europe and MENA.The results seem to indicate efficiency improvements and convergence in the northern and eastern European region, but not in the Mediterranean Europe and MENA region. More specifically, the northern and eastern parts of the EU are much more homogenous in the progressive movement towards a common technology, although significant differences among groups of countries remain. Taken together, the research results suggest that the reform experience of the MENA countries has been less successful than in other developing and transition countries, particularly in eastern Europe