This paper addresses the empirical question of measuring competition in the banking sector. The question is relevant both from a positive and a normative perspective. Banking industries in Europe, specifically in France and Italy, are quickly changing their structure after deregulation, and it is interesting to find out which direction competition among banks has been following in the past few years. It is also interesting to be able to measure and forecast the change in degree of competition due to mergers among banks in an antitrust perspective. The analysis is not however entirely data based. The quantitative results are derived from a well founded theoretical model that allows to infer information about benefits and costs by bank and by market from banks’ entry and branching decisions. The estimated benefits and costs are then used to compute measures of degree of competition. It results that the structures of the French and Italian banking industries differ, with a strong evidence that the Italian banking sector is still far from an equilibrium state, mostly because economies of scale in branching have still to be exploited and local market power niches are still allowed to exist. Both measures of competitive behaviour presented in the paper indicate, on average, tougher competition in France than in Italy. There is also some evidence that mergers do not induce lesser competition. Rather the opposite, in some cases.

Competition in french and italian banking markets. A comparison.

CHIZZOLINI, BARBARA
2007

Abstract

This paper addresses the empirical question of measuring competition in the banking sector. The question is relevant both from a positive and a normative perspective. Banking industries in Europe, specifically in France and Italy, are quickly changing their structure after deregulation, and it is interesting to find out which direction competition among banks has been following in the past few years. It is also interesting to be able to measure and forecast the change in degree of competition due to mergers among banks in an antitrust perspective. The analysis is not however entirely data based. The quantitative results are derived from a well founded theoretical model that allows to infer information about benefits and costs by bank and by market from banks’ entry and branching decisions. The estimated benefits and costs are then used to compute measures of degree of competition. It results that the structures of the French and Italian banking industries differ, with a strong evidence that the Italian banking sector is still far from an equilibrium state, mostly because economies of scale in branching have still to be exploited and local market power niches are still allowed to exist. Both measures of competitive behaviour presented in the paper indicate, on average, tougher competition in France than in Italy. There is also some evidence that mergers do not induce lesser competition. Rather the opposite, in some cases.
Chizzolini, Barbara
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/3716744
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