6533b834fe1ef96bd129caf1

RESEARCH PRODUCT

Integration and competition in the European financial markets

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Financial integration in Europe should affect the competition between markets and intermediaries and generate a convergence of both interest rates and margins among the different countries. This paper analyses the evolution of the convergence in interest rates and the level of competition and its inequalities among the European banking systems for the period 1993 to 2001. The inequality index used ?the Theil index- allows us to break down the inequalities so that the importance of either a country effect or a specialization effect is quantified. If the former effect dominates it would mean that the national banking markets are segmented as a consequence of the existence of obstacles or barriers to the integration. On the other hand, the dominance of the latter effect would be related to the different level of competition depending on the type of banking specialization.