Case study

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Do Banks Compete?

Research on the competitive features of banking markets 

At Bangor University there is an extensive tradition of research addressing the public-policy concern of whether banks operate competitively or if they behave more like monopolists. If banks compete effectively this should be reflected in lower prices, more efficient operations and higher quality of services for customers. The underpinning research focuses on advances in the modelling of the competitive features of banking markets using price-cost or/and price-revenue relationships as well as various concentration indicators. Methodological advances also sought to model bank efficiency using a range of techniques and link indicators of bank efficiency and risk to competition.

This research has been extensively used in policy debate within a variety of financial organizations at the national, European and international level. An important contribution of this work is to measure three critical dimensions of bank behaviour – competition, efficiency and risk-management – that cannot be viewed in isolation and (for accuracy and policy relevance) must be considered as related and modelled accordingly.

“This work has had an important influence on policy analysis of banking sector competition and efficiency. These approaches are now widely used in policy circles to gauge the competitive nature of banking systems” Roberto Violi, Senior Director, Banca d’Italia.