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Journal of Economic Integration 2021 March;36(1) :103-124.
DOI: https://doi.org/10.11130/jei.2021.36.1.103
Efficiency of European Banks in the Aftermath of the Financial Crisis: A Panel Stochastic Frontier Approach

Cândida Ferreira 

ISEG, Universidade de Lisboa, UECE and REM, Portugal
Corresponding Author: Cândida Ferreira ,Email: candidaf@iseg.ulisboa.pt
Copyright ©2021 Journal of Economic Integration
ABSTRACT
Using panel estimates and Stochastic Frontier Analysis this paper aims to contribute to the analysis of bank efficiency of the European banks in the aftermath of the international financial crisis and the sovereign crisis that seriously affected many EU countries. It also considers hypothetical scenarios of exit from the EU of some of the particularly relevant member-states, including the Brexit scenario. The results obtained very clearly demonstrate the existence of statistically significant technical inefficiencies in all considered scenarios. Nevertheless, the results reveal that the exclusion of the Italian banks and of the UK banks from our estimates would be more beneficial to the decrease of the banks’ cost inefficiencies than the exclusion of the French and the German banks. Moreover, the worst scenario in terms of the decrease of the EU banks’ cost inefficiencies would be the exclusion of the banks from the five EU countries that were deeply affected by the international financial and sovereign crises and were obliged to restructure their bank systems, that is, Cyprus, Greece, Ireland, Portugal and Spain.

JEL Classification
C33: Models with Panel Data; Longitudinal Data; Spatial Time Series
D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
F36: Financial Aspects of Economic Integration
G21: Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Keywords: Bank efficiency | Stochastic Frontier Analysis | EU banking sector | Brexit
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