Is There a Single Frontier in a Single European Banking Market?

36 Pages Posted: 28 Dec 2006

See all articles by Jaap W.B. Bos

Jaap W.B. Bos

Maastricht University

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division

Date Written: December 2006

Abstract

This paper attempts to estimate comparable efficiency scores for European banks operating in the Single Market in the EU. Using a data set of more than 5000 large commercial banks from all major European banking markets over the period 1993-2004, the application of meta-frontiers enables us to assess the existence of a single and integrated European banking market. We find evidence in favor of a single European banking market characterized by cost and profit meta-frontiers. However, compared to the meta-frontier estimations, pooled frontier estimations tend to underestimate efficiency levels and correlate poorly with country-specific frontier efficiency ranks.

Keywords: X-efficiency, stochastic frontiers, banking, meta-frontiers, technology gap ratios

JEL Classification: G21, L11, L22, L23

Suggested Citation

Bos, Jaap W.B. and Schmiedel, Heiko, Is There a Single Frontier in a Single European Banking Market? (December 2006). ECB Working Paper No. 701. Available at SSRN: https://ssrn.com/abstract=947130

Jaap W.B. Bos (Contact Author)

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division ( email )

Directorate General Payment Systems
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49-69 13 44 70 59 (Phone)
+49-69 13 44 60 00 (Fax)

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