Competition in EU banking

This chapter discusses recent EU-wide movements in bank competition and concentration. We start with a concise overview of the most frequently used competition and concentration measures. Given that different measures may capture different aspects of bank competition, we focus on the differences and similarities between concentration and competition measures for a broad sample of EU banks. We show that a high level of bank concentration does not necessarily imply a low level of competition and that competition measures such as the Boone indicator (Boone, The Economic Journal, 118(531), 1245–1261, 2008) and the H-statistic (Panzar and Rosse, The Journal of Industrial Economics, 35(4), 443–456, 1987) might capture different aspects of bank competition. Next, we discuss the evolution of bank competition in the EU over time. We end with an overview of recent findings on three important issues concerning bank competition: the impact of bank competition on bank risk-taking, the relationship between bank competition and systemic risk and the relationship between bank competition and switching costs for bank customers.