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 i n countries which adopt the Single Currency, we use the H indicator suggest ed by Panzer and Rosse (Panzar, J.C., Rosse, J.N., 1987, Journal of Industr ial Economics 35, 443-456). Our contribution is to assess results separatel y 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 pro vide evidence that the behavior of large banks was not fully competitive as compared to the US. Regarding small banks, the level of competition appear s to be even lower, especially in France and Germany. (C) 2000 Elsevier Sci ence B.V. All rights reserved. JEL classification: G21; L12.