Swedish Savings Banks and Competition A Panzar-Rosse model approach

In this paper the Swedish savings banks sector is analyzed between the years 2002 and 2010 using the Panzar-Rosse model. The model uses the reduced form revenue function to capture a relation with the factor price elasticites. The narrow geographical area for many savings banks along with local presence for many years creating awareness of the bank may suggest that these banks could act as local monopolies. A comparison is also made with commercial banks as well as savings banks of different sizes. Using data for 49 savings banks and eight commercial banks the findings suggests monop-olistic competition behaviour by savings banks and that commercial banks could be characterized by monopoly. The results suggests that neither bank type, nor savings banks of different sizes, can be confirmed acting competitively. The only exception is medium sized savings banks. Thus, the conclusion is that the Swedish banking sector is not competitive