Abstract
The aim of this paper is to discuss changes in the banking sectors of European Union (EU) countries both before and during the last global financial crisis, with particular emphasis on the change in market structure, in an attempt to determine the relationship between size, competition, and risk-taking behavior by banks. This paper also addresses the problems in the banking sector of the EU (i.e., that banks are too-big-to-fail [TBTF]).The empirical results find that the banking sectors within EU are not homogeneous and also that there is asymmetry between the performance of EU-15 (i.e., large banking sectors) and EU-12 banking sectors (i.e., small banking sectors). Generally, size had a negative impact on financial stability within the EU banking sectors. However, this paper finds no strong evidence for a relationship between competition and risk-taking behavior by EU banks. Finally, this paper finds evidence for the existence of a TBTF effect within EU-15 banking sectors.
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