Competition, contestability and market structure in European banking sectors on the eve of EMU

In order to assess the effect of EMU on market conditions for banks based in countries which adopt the Single Currency, we use the H indicator suggested by Panzer and Rosse (Panzar, J.C., Rosse, J.N., 1987, Journal of Industrial Economics 35, 443-456). Our contribution is to assess results separately for large and small banks, and for interest income and total income as a dependent variable. From a panel of banks over the period 1992-1996, we provide evidence that the behavior of large banks was not fully competitive as compared to the US. Regarding small banks, the level of competition appears to be even lower, especially in France and Germany. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: G21; L12.