In
October 2014, the ECB has published a report on the structure of the
European banking sector.
In a
nutshell: “Cost containment”, “deleveraging”,
“restructuring”, “rationalization”, “resizing process”,
“balance sheet repair”, and the like all describe the same
finding: The sector is shrinking.
For
people working in banks, this is certainly less of good news. The
cake is actually getting smaller but the number of invitees to the
party remains pretty much the same.
But is
this all bad? No. As a matter of fact, the ECB says that the overall
efficiency of the system continues to increase.
Number
of credit institutions
The
total number of credit institutions is down 12 % since 2008. Only
Estonia (+ 33 %), Latvia (+ 93 %), Luxembourg (+ 1 %), and Malta (+
17 %) have seen increases. The highest decreases can be found in
Cyprus (- 46 %), Greece (- 42 %), Netherlands (- 23 %), and Spain (-
28 %).
Number
of foreign branches
Overall,
the number of foreign branches in Eurozone countries has, since 2008,
been flat. However, this masks huge differences across the continent:
Highest
decreases can be observed in Estonia (- 36 %), Greece (- 33 %), and
Portugal (- 14 %), while Belgium (+ 14 %), Cyprus (+ 17 %), Latvia (+
50 %), Netherlands (+ 22 %), and Slovakia (+ 67 %) show the most
important increases in foreign branches.
Total
assets of domestic banking groups
In
aggregate, total assets of domestic banking groups are down 18 %
since 2008.
Most
remarkably, Belgian banks loose 61 %, Cyprus banks 53 %, Irish banks
49 %, Luxembourg banks 32 %, and Dutch banks 22 %. Only Finland (+ 29
%) and Malta (+ 63 %) have seen growing markets since 2008. Total
assets in the Spanish domestic banking sector are flat.
At the
end of 2013, total assets amounted to 23 BEUR. This represented
roughly twice the 2013 GDP of all Eurozone countries.
Total
assets of foreign subsidiaries and branches
Total
assets of foreign subsidiaries and branches in the Eurozone shrank
even more. Overall, they are down 29 % since 2008.
The
most important downward trend could be observed in Estonia (- 46 %),
Germany (- 72 %), Greece (- 87 %), and Ireland (- 53 %). Belgium (+
124 %) and Netherlands (+ 50 %) experienced a much higher influence
of foreign financial institutions on their markets.
Looking
at the entire Eurozone, the influence of European banks in other
European markets remains very moderate: By the end of 2013, total
assets of foreign subsidiaries and branches represented only 14 % of
aggregate total assets (including domestic banking groups as well as
foreign subsidiaries and branches).
Distribution
of banking sector assets by type of institution
Large
European economies are very much dominated by local financial
institutions. This is especially true for France, Germany, Greece,
Italy, Netherlands, and Spain, where assets held by domestic credit
institutions are around or exceed 90 % of total banking sector
assets.
By
contrast, Estonia, Finland, Luxembourg, and Slovakia are all heavily
dominated by subsidiaries of EU credit institutions.
Malta
is, obviously, a hub for branches of non-EU credit institutions.
Market
concentration of European credit institutions
Overall,
the markets for credit institutions in Europe are not very
concentrated. On average, the Herfindahl index stands at 1,202. Given
the index ranges from 0 (fully competitive market) to 10,000
(monopoly) and the fact that only values above 1,800 signal high
concentration, Europe is a pretty competitive market.
Austria
(405), Germany (266), Italy (406), and Luxembourg (357) are at the
lower end of the index, whereas Finland (3,080), Greece (2,136), and
Netherlands (2,104) can be found at the upper end of the index.
The
findings of the Herfindahl index match the statistics of the share of
total banking assets held by the five largest credit institutions.
Resource:
