Bank Efficiency in the Enlarged European Union 1

The banking sectors of the European Union have faced numerous challenges in the past decade. With regard to old EU members, as a result of the Second European Banking Directive and the Single European Passport the speed of deregulation accelerated, and with the elimination or lowering of barriers market-entry costs substantially decreased, favouring competition and the creation of a Unified Banking Market. Economic and monetary union also encouraged the abolition of operational obstacles. The introduction of the euro opened the way for the further deepening of banking sector integration, whereby local banks gradually lost their competitive edge to foreign banks, mainly in terms of financial services. The rapid development of information technology, the appearance of new competitors exploiting opportunities offered by a global capital market and the creation of new markets linked to rapid innovations also promoted the intensification of competition and the accelerated consolidation of the European banking system.