Market power in european banking sectors

This study analyses the evolution of market power in the banking sectors of the European Union based on the estimation of Lerner indices. Using a panel of 18,810 observations of the banking industries of Germany, France, Italy, Spain and the United Kingdom during the period 1992-99, the results show substantial differences between countries. The evolution of the Lerner index does not show an increase in the degree of competition within the EU, despite the liberalisation measures implemented in order to create a single banking market. The study discusses the limitations to the interpretation of the Lerner index as an indicator of the degree of competition, and analyses its determining factors