The Swedish Banking Market: Competitive conditions undergoing change

Abstract

This paper examines competitive conditions on the Swedish banking market over the years 2006-2016, a time period where the number of Swedish banks has decreased at the same time as concentration has decreased and a large number of structural changes have taken place as for example the establishment of firms offering financial innovations and services commonly supplied by only banks. Competition is measured using the Panzar-Rosse methodology, which analyses the effect of changes in input factor prices on a reduced form of bank revenue. The sample is divided in two subsamples; commercial banks and saving bank and analysed in two time periods, early and late years, in order to distinguish differences in competitive behaviour between banks with different owner forms and to observe the evolution of the competitive conditions during this time period. For all time periods the market is found to be in disequilibrium which complicates the interpretation of the estimated level of competition, although we find indications of stabilization during the second half of the time period.