Efficiency in Banking: Empirical Evidence from the Savings ... - Ivie

1. Introduction
Savings banks are an important part of the European banking system accounting
for around 20% of banking system assets. In terms of customer deposits, savings banks
are even stronger with some national sectors holding over 30% and 40% market share
(European Savings Banks Group, 1997). Although their roots lie in retail banking,
savings banks have typically evolved to full-service banks that are virtually
indistinguishable from their commercial bank competitors (Gardener et al, 1997). As
such, savings banks are subject to those same competitive forces (and deregulatory
processes) that have and are shaping the EU banking system.
One feature that still differentiates the majority of savings banks from
commercial banks is their organisational form. Savings banks typically began as mutual
institutions and some operate with a significant level of state involvement. Competitive
pressures like the need to realise capital adequacy requirements have led to some
savings banks sectors being restructured 1 . In other sectors there is pressure to demutualise
and, indeed, convert into joint stock institutions 2 . Yet, there is no
requirement for savings banks to operate under any particular organisational structure,
providing EU competition law is not violated (Ehlermann, 1992) 3 .
The importance of evaluating the efficiency of savings banks is emphasised by
Köhler (1996, p. 7) who states that 'The savings banks of today are business concerns
1 The French savings banks sector, for example, was reconfigured in June 1991 with the result that the
number of savings banks reduced from over 180 to 35. The new number of French savings banks
corresponds to the 31 French regions and 4 overseas dependencies.
2 The conversion of four previously mutual UK building societies in 1997 provides such an example.
3 Post-1980, national policies and EU directives aimed to facilitate a more open and competitive
environment for banks. European law, however, considers the operations and functions of enterprises.
Providing that competition law is not violated, the law does not differentiate between or confer certain
advantages upon companies organised under private law as opposed to those belonging to the public,
cooperative, mutual and non-profit sectors (Ehlermann, 1992).
2