Bank performance and convergence during the financial crisis: Evidence from the ‘old’ European Union and Eurozone

Roman Matousek, Aarti Rughoo, Nicholas Sarantis, A.George Assaf

Research output: Contribution to journalArticlepeer-review

43 Citations (Scopus)
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Abstract

This paper investigates the process of banking integration in the EU15 countries and the Eurozone by testing for convergence in bank efficiency among commercial banks. We use a two-step approach: First we estimate efficiency by applying an innovative methodological approach that treats banks’ non-performing loans as an undesirable output. Second, we apply the Phillips and Sul (2007) panel convergence methodology to assess the convergence process in European banking. Our results indicate an overall decline in efficiency and no evidence of group convergence following the financial crisis. However, we find the presence of club formation with typically weak convergence. The heterogeneity displayed by the transition parameters for the individual countries and the notable decrease in competition levels post 2008 highlight the impact of the financial crisis on the integration process.
Original languageEnglish
Pages (from-to)208-216
JournalJournal of Banking and Finance
Volume52
Early online date27 Aug 2014
DOIs
Publication statusPublished - 1 Mar 2015

Keywords

  • Banking efficiency
  • convergence

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