University of Hertfordshire

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Original languageEnglish
Pages (from-to)208-216
JournalJournal of Banking and Finance
Early online date27 Aug 2014
Publication statusPublished - 1 Mar 2015


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.


This is the accepted manuscript version of the following article: Roman Matousek, Aarti Rughoo, Nicholas Sarantis, and A. George Assaf, ‘Bank performance and convergence during the financial crisis: Evidence from the ‘old’ European Union and Eurozone’, Journal of Banking and Finance, Vol 52, pp 208-216, first published online August 27, 2014. The version of record is available online via doi: Published by Elsevier. Copyright © 2014 Elsevier B.V. All rights reserved.

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