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2018 | OriginalPaper | Chapter

7. Economies of Scope in the EU Banking Industry

Authors : Ludovico Rossi, Elena Beccalli

Published in: Corporate Governance in Banking and Investor Protection

Publisher: Springer International Publishing

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Abstract

This paper documents the presence on average of cost economies of scope in the European banking industry, that is, banks minimize total costs, given a certain level of outputs, producing a differentiated mix of outputs. Our results are particularly important in the light of the 2014 structural reform proposal on the EU banking industry which aims to separate the traditional commercial banking from investment activity. The loss of efficiency for banks might have consequences for customers who could suffer an increase in the costs of financial services to try to compensate banks for their loss of efficiency. Bank regulations would be myopic if they focus on investor protections whilst neglecting bank efficiency.

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Footnotes
1
Mean values qualitatively confirm median values results.
 
2
An alternative explanation is that, as a result of the financial crisis, the banks’ profit margins might have decreased, simply forcing them to offer a more differentiated output mix. Nevertheless market conditions after the financial crisis would be reflected in input prices, output quantities and control variables. Therefore, it seems plausible that our WSCOPE findings suggests that increasing the output mix enables banks to minimize total costs, given the existing market conditions.
 
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Metadata
Title
Economies of Scope in the EU Banking Industry
Authors
Ludovico Rossi
Elena Beccalli
Copyright Year
2018
DOI
https://doi.org/10.1007/978-3-319-70007-6_7

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