EFFICIENCY AND COMPETITION IN ROMANIAN BANKING SYSTEM: EMPIRICAL EVIDENCES

Our paper aims to provide a response to a challenge, namely quantifying the efficiency and competition in the Romanian banking system, as we have noted the absence of baseline studies on this topic. Correlated with bank profitability, the two concepts provide a full picture of the bank and answer to the questions: Why, how and where a bank is positioned in the banking system? We believe that our contribution brings back to the center of the theoretical approaches the two coordinates of banking activity, and from the perspective of professionals, we offer them more subtle information about inputs and outputs in banking and the bank's market power, degree of competition and efficiency, in terms of cost or profit. Thus, we have empirically examined the degree of competition and cost-efficiency achieved by the Romanian systemically important banks, because we considered that a high level of efficiency in the banking business, amid a competitive environment, significantly influences the performance and financial soundness of the entire banking system.