Intermediation,integration and internationalisation: a survey on banking in Europe

This paper provides a survey on recent developments in the European banking industry. Traditional banking activities have contracted in relative terms, but banks remain the predomination players in the euro area financial system. Economic and monetary integration in the EU has strongly encouraged internationalisation and concentration. The share of foreign assets and liabilities on EU banks' balance sheets is still modest but rising sharply. So far, mergers and acquisitions have mainly been of a domestic nature. Information technology has changed banks' production, products and markets, whereas the Internet may radically change the way banks interact with customers. All these phenomena have strong effects on concentration, competition and efficiency. Finally, the question is addressed whether the observed consolidation and increased competition may have impaired financial stability.