An aggregate structural model of competition in the European banking industry

The objective of this study is to analyze competition in the European banki ng industry in light of the changing regulatory frameworks to which banks a re exposed. We focus on the provision of mortgages to households and loans to the corporate sectors in seven European countries. We develop and estima te an aggregate model for the European banking industry which controls for asymmetries in market structure. We reject non-cooperative Nash behavior in favor of more collusive cartel-like conduct. In addition, we provide some evidence that the degree of coordination among banks in the household marke t has fallen over the period. Such evolution can presumably be associated w ith the widespread deregulation that took place during the 1980s. (C) 1999 Elsevier Science BN. All rights reserved.