A comparative analysis of the US and EU retail banking markets - Wsbi

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Relative to population, the European Union had 19 institutions for each 1 million heads of population in 2003. However, this figure varies significantly from country to country, ranging from 5 in Greece to 381 institutions per 1 million inhabitants in Luxembourg. Countries that have below EU average number of institutions relative to population include the UK (7), Spain (8), Belgium (10), Italy (14) and France (16). 5.2.1.2.3 Number of branches The number of branches in Europe has increased from 173,152 branches in 1985 to 186,009 in 2003, an increase of 7.4% (see table 4 below). For the EU as a whole, on a per capita basis, there were 495 branches per 1 million inhabitants in 1995 and 485 in 2003 (see table D in table annex for figures for each Member State). Graph 4: Evolution of the number of branches per 1,000,000 inhabitants in the EU 600 575 550 525 500 475 450 425 400 1985 1990 1995 1996 1997 1998 1999 2000 2001 2002 Source: ESBG calculations on the basis of data from the ECB (see previous table) and Eurostat (for the population). 2003 Table 4: Evolution of the number of branches of credit institutions in the EU, per Member State 1985 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 Belgium 8,577 8,988 7,709 7,526 7,358 7,129 6,982 6,616 6,168 5,550 4,989 Denmark 3,684 2,985 2,310 2,321 2,283 2,291 2,294 2,365 2,376 2,128 2,118 Germany 47,373 50,245 48,272 47,567 63,186 59,929 58,546 56,936 53,931 50,867 47,351 Greece 1,691 1,937 2,455 2,471 2,510 2,779 2,850 3,004 3,134 3,263 3,300 Spain 29,248 32,266 36,626 37,494 38,039 39,039 39,376 39,311 39,024 39,021 39,762 France 26,043 25,578 25,492 25,571 25,464 25,428 25,501 25,657 26,049 26,162 25,789 Ireland 848 951 1,050 1,096 942 1,026 977 880 970 926 924 Italy 13,017 17,591 23,307 24,458 25,601 26,748 27,134 28,177 29,270 29,926 30,502 Luxembourg 323 300 424 417 318 324 345 335 274 271 269 Netherlands 8,572 8,106 6,817 6,850 6,800 6,787 6,258 5,983 5,207 4,610 3,671 Austria 4,086 4,472 4,613 4,620 4,691 4,587 4,589 4,570 4,561 4,466 4,395 Portugal 1,505 1,994 3,515 3,828 4,746 4,947 5,401 5,662 5,534 5,390 5,440 Finland 3,585 2,899 1,996 1,745 1,289 1,254 1,193 1,202 1,257 1,267 1,252 Sweden 3,594 3,264 2,651 2,476 2,521 2,197 2,140 2,059 2,040 2,040 2,061 United Kingdom 21,004 20,190 17,024 15,904 16,344 15,854 15,387 14,756 14,554 14,392 14,186 EU 173,152 181,765 184,261 184,345 202,092 200,319 198,973 197,513 194,349 190,279 186,009 Note: The break in the German series is due to the inclusion of post ofices from 1997. Source: ESBG calculations on the basis of data from the ECB and Eurostat for the years 1985 until 1996. From 1997 onwards: "Report on EU Banking Structure", ECB, November 2004. 78
5.2.1.3 Comparison The EU 15’s banking sector is more than twice as big as the US banking sector in terms of assets (€22,098 compared to €8,139 billion). This is explicable in terms of the continuing importance of bank intermediation in Europe in contrast to the US, where the trend for a number of years has been for investors and credit institutions alike to obtain financing via the capital markets. We say more on that later in the chapter (in the section which looks at balance sheet structures (5.3.1)). Looking at the evolution of the banking industry in terms of the number of credit institutions, both the EU and the US experienced large falls in the number of credit institutions in the last two decades, and of the same order of magnitude. Note however the great disparities between various countries in the EU, with a number of the smaller European countries actually experiencing an increase in the number of credit institutions. Note also that the decline in the number of credit institutions was significantly greater in two of Europe’s biggest economies: Germany (53%) and France (55%), than for either the whole of Europe (41%), or the US (44%) for the period 1985-2003. In terms of the number of credit institutions, the US has considerably more credit institutions (18,533) 235 than the EU 15 (7,444) in spite of the former having a great deal less people than the latter (288 million compared to 381 million). This means therefore that the US has many more credit institutions relative to its population than the EU, with 64 credit institutions per 1 million inhabitants compared to 19 credit institutions per 1 million inhabitants for the EU. Although this figure varies substantially across Europe, France, Italy, Spain, the UK and even Germany (which has the largest banking sector in the EU in terms of the number of credit institutions) all have less than 30 institutions per 1 million inhabitants. In terms of the number of branches, in spite of significant decreases in the number of institutions, both the EU and the US have experienced an increase in the number of branches. The increase in the US between 1985 and 2003 of 12% is however more important than that experienced in the EU for that same period (7%), very possibly a result of the increase in branch banking and interstate branching following the Riegle-Neal Act of 1994 that did away with federal restrictions on interstate branching. It is interesting to note, however, that the number of branches had already increased by 7% over the 5 year period between 1985 and 1990, and therefore before the enactment of the Act. The increases in the number of branches of credit institutions experienced in the US and the EU in spite of the large decline in the number of credit institutions in both those markets suggests that in the age of globalisation, local market representation and proximity to customers is deemed essential by both American and European banks. In spite of the EU having a great deal less credit institutions than the US, it has twice the number of branches (186,009 in the EU compared to 99,807 in the US for the year 2003). This translates to a larger number of branches relative to population of the order of 485 branches per 1 million inhabitants in the EU compared to 343 for the US. 235 And even if one excludes credit unions, which make up half of the number of credit institutions in the US, the US still has more credit institutions than the EU (9,164 compared to 7, 444). 79
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September 2006 RESEARCH A COMPARATI
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IE UK FR BE NL LU DK DE SE CZ AT SL
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The following WSBI/ESBG committees
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4 Regulation and supervision compar
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6.5 Issues of competition in retail
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To finish, if we had to pick from a
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In the US, credit institutions have
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Following the same logic, the EU co
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In that context, it is tempting to
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3. INSTITUTIONAL COMPARISON 3.1 Sec
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The market share of the US banking
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FDIC-insured commercial banks are i
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Page 29 and 30: Regulatory reform over the past thi
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Page 35 and 36: 3.2.2.2.2.2 Ownership and corporate
Page 37 and 38: Hermann Schulze-Delitzsch and Fried
Page 39 and 40: In contrast, building societies in
Page 41 and 42: The commitment of savings banks is
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Page 47 and 48: The European Parliament has to be k
Page 49 and 50: In fact, it should be mentioned her
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Page 55 and 56: Another important factor in the cho
Page 57 and 58: In the European Union, contrary to
Page 59 and 60: Although younger than CESR, both CE
Page 61 and 62: 4.2.5.1.1.1.1 Limitation of the geo
Page 63 and 64: 4.2.5.1.1.3 Recent trend: regulatio
Page 65 and 66: Another important common feature be
Page 67 and 68: The best execution rule was first m
Page 69 and 70: 4.3.2.2.4 National Market System ru
Page 71 and 72: The ISD set a basis for the develop
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Page 76 and 77: The decline of savings institutions
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Page 84 and 85: 5.2.3 Concentration and consolidati
Page 86 and 87: 5.2.3.2 European Union Average CR5
Page 88 and 89: In terms of the nature of consolida
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Page 98 and 99: Finally, looking at cost-income rat
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Page 112 and 113: 6.2.1.3 Comparison 6.2.1.3.1 Size o
Page 114 and 115: In terms of market competition, the
Page 116 and 117: The residential mortgage market in
Page 118 and 119: Funding by retail deposits represen
Page 120 and 121: In sharp contrast, the US mortgage
Page 122 and 123: 6.2.3.1.2 Lenders to small business
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Page 126 and 127: Factoring is also continuously gain
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6.2.3.2.4 Securitisation of small b
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The above fears can hardly be allay
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- ACH credits and debits: the stati
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6.3.2.1.2 Financial intermediaries
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It should be noted that two of the
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Assuming that technology, globalisa
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The report adds: “although it bou
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Graph 19: Use of different distribu
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In terms of funding of the business
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Since then, established banks have
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MoU Memorandum of Understanding OTC
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Annex 2: Statistical appendix Table
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Table F: Share of US banking indust
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Table L: Structure of the liabiliti
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Table R: Number of ATMS in the EU a
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F - Federal Deposit Insurance Corpo
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