This paper tries to assess how the current program of European integration will affect the structure of the European retail banking industry. It is argued that trade in banking services is, and will presumably remain, limited, while there is still concern about possible trade diversion. Next, we analyze the conditions for the establishment of subsidiaries of European banks in other European countries. We argue that current directives will matter in so far as they set in motion a process of competitive deregulation. We find that deregulation should induce more price competition. In turn, this will affect bank strategies in terms of the quality of service they choose to offer, in terms of the number and locations of their branches, in terms of the price discrimination they can achieve and in terms of the way in which customer loyalty can be exploited.
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