Bank Competition and Credit Risk in Euro Area Banking: Fragmentation and Convergence Dynamics

Maria Karadima and Helen Louri
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Maria Karadima: Department of Economics, Athens University of Economics and Business, 76 Patission Street, GR-10434 Athens, Greece

JRFM, 2020, vol. 13, issue 3, 1-28

Abstract: Consolidation in euro area banking has been the major trend post-crisis. Has it been accompanied by more or less competition? Has it led to more or less credit risk? In all or some countries? In this study, we examine the evolution of competition (through market power and concentration) and credit risk (through non-performing loans) in 2005–2017 across all euro area countries (EA-19), as well as core (EA-Co) and periphery (EA-Pe) countries separately. Using Theil inequality and convergence analysis, our results support the continued existence of fragmentation as well as of divergence within and/or between core and periphery with respect to competition and credit risk, especially post-crisis, in spite of some partial reintegration trends. Policy measures supporting faster convergence of our variables would be helpful in establishing a real banking union.

Keywords: banking competition; credit risk; NPLs; Theil index; convergence analysis (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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