Handbook of Competition in Banking and Finance
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Handbook of Competition in Banking and Finance

Edited by Jacob A. Bikker and Laura Spierdijk

For academics, regulators and policymaker alike, it is crucial to measure financial sector competition by means of reliable, well-established methods. However, this is easier said than done. The goal of this Handbook is to provide a collection of state-of-the-art chapters to address this issue. The book consists of four parts, the first of which discusses the characteristics of various measures of financial sector competition. The second part includes several empirical studies on the level of, and trends in, competition across countries. The third part deals with the spillovers of market power to other sectors and the economy as a whole. Finally, the fourth part considers competition in banking submarkets and subsectors.
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Chapter 7: Competition in the European banking markets in the aftermath of the financial crisis

Juan Fernández de Guevara and Joaqu'n Maudos

Abstract

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.

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