Abstract
We examine the reallocation of profits in the European and US banking sectors in
the period of 1995 to 2004. Specifically, we ask whether the restructuring of both
industries has contributed to an efficient reallocation of assets. Using a revised
decomposition framework, we find that US banks are more flexible in the
reallocation of profits than their European counterparts. In the US, efficient banks
that appropriate assets decrease industry profitability, as expected in a market
characterized by a sufficiently high level of competition. In addition, economies of
scale are exploited more in the US than in Europe. Regulatory reforms in the EU, in
particular in response to the current crisis, should therefore foster a more closely
integrated European market.
the period of 1995 to 2004. Specifically, we ask whether the restructuring of both
industries has contributed to an efficient reallocation of assets. Using a revised
decomposition framework, we find that US banks are more flexible in the
reallocation of profits than their European counterparts. In the US, efficient banks
that appropriate assets decrease industry profitability, as expected in a market
characterized by a sufficiently high level of competition. In addition, economies of
scale are exploited more in the US than in Europe. Regulatory reforms in the EU, in
particular in response to the current crisis, should therefore foster a more closely
integrated European market.
| Original language | English |
|---|---|
| Place of Publication | Utrecht |
| Publisher | UU USE Tjalling C. Koopmans Research Institute |
| Number of pages | 16 |
| Publication status | Published - May 2009 |
Publication series
| Name | Discussion Paper Series / Tjalling C. Koopmans Research Institute |
|---|---|
| No. | 12 |
| Volume | 09 |
| ISSN (Electronic) | 2666-8238 |
Keywords
- market structure
- efficiency
- restructuring
- stochastic frontier
- banking