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

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).
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