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Juan Fernández de Guevara and Joaqu'n Maudos

The recent financial crisis affected the banking sector in several European countries, forcing them to embark on a process of restructuring. The resulting increase in market concentration may have affected the level of competition. In this context, this chapter examines the impact of the crisis on competition in the banking sector in Europe’s largest economies over the period 2002–12. In the specific case of the lending market, the results show market power to have increased in many countries over the course of the crisis, although the results are sensitive to the indicator used. Although the mergers and acquisitions-oriented strategy followed in some countries to restructure the sector may have had a negative impact on competition, it has shored up financial stability, such that the net effect of greater concentration may be positive for social welfare.