- 1815-1973 (online)
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
The State of the Banking Sector in Europe
- Dirk Schoenmaker1, Toon Peek1
- Author Affiliations
- 1: Duisenberg School of Finance, Netherlands
- 27 Jan 2014
- Bibliographic information
At the bank level, the top tertile of well-capitalised banks (with a market based leverage ratio well above 4%) continues lending. By contrast, the 2nd tertile of medium-capitalised banks (between 3 and 4%) and the 3rd tertile of weakly capitalised banks (well below 3%) show a strong decline in lending. Moreover, the market-to-book ratio is below one for these banks. The market thus gives a lower value to these banks.
Our findings provide prima facie evidence of a credit crunch in Europe. Another fallout of the financial crisis is an increase, though very modest, of concentration in banking in the distressed countries (Greece, Ireland, Portugal, Spain and Italy). The enhancement of financial stability through (forced) M&As seems to come at the expense of reduced competition.
- geographical segmentation, capital, deleveraging, cross-border banking, credit supply, banks
- JEL Classification:
- G22: Financial Economics / Financial Institutions and Services / Insurance; Insurance Companies; Actuarial Studies
- G32: Financial Economics / Corporate Finance and Governance / Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G38: Financial Economics / Corporate Finance and Governance / Government Policy and Regulation