Increasing concentration in european banking: a macro-level analysis

The recent wave of mergers and acquisitions in the European banking sector has raised concerns that bank profitability will rise because of less competitive market conditions. This paper analyses the relationship between concentration, competitiveness, efficiency and profitability in the European banking markets by using panel regressions. Estimates from various recent studies on competition and efficiency in national banking sectors are related to concentration and profitability indicators for these sectors. Our results do not suggest the existence of any connection at the macro-level between concentration and competition. There is also no robust relationship between concentration and profitability.