COMPETITIVE CONDITIONS IN EUROPEAN BANKING

In this paper we utilise the Rosse-Panzar statistic to assess competit ive conditions in major EC banking markets between 1986 and 1989. Alth ough EC banking legislation has established relatively free access to member country banking systems in recent years, our results indicate n o change in market conduct of banks between 1986 and 1989. The results suggest that banks in Germany, the United Kingdom, France and Spain e arned revenues as if under conditions of monopolistic competition in t he period. In the case of Italy, they are consistent with banks having earned revenues as if under monopoly or conjectural variations short- run oligopoly conditions. We interpret the results as indicative of a lack of integration in EC banking markets and they thus underline the importance of the Second Banking Directive, the associated supervisory arrangements, and the elimination of capital controls as to achieving full integration,