Consolidation in banking and financial stability in Europe: empirical evidence

André Uhde and Ulrich Heimeshoff

No 02/2009, FAU Discussion Papers in Economics from Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics

Abstract: Using aggregate balance sheet data from banks across the EU-25 over the period from 1997 to 2005 this paper provides empirical evidence that national banking market concentration has a negative impact on European banks' financial soundness as measured by the Z-score technique while controlling for macroeconomic, bank-specific, regulatory, and institutional factors. Furthermore, we find that Eastern European banking markets exhibiting a lower level of competitive pressure, fewer diversification opportunities and a higher fraction of government-owned banks are more prone to financial fragility whereas capital regulations have supported financial stability across the entire European Union.

Keywords: Market structure; Financial stability; Banking regulation (search for similar items in EconPapers)
JEL-codes: G21 G28 G34 L16 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ban, nep-bec, nep-com, nep-eec, nep-eff, nep-reg and nep-rmg
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Citations: View citations in EconPapers (283)

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Journal Article: Consolidation in banking and financial stability in Europe: Empirical evidence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwqwdp:022009

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