The European Banking Sector Through Turbulence Times (2005-2014)

Abstract

Objectives The paper’s first goal is to track the behavior, financial structure and corporate governance schemes of the European banks before, during and after the crises of 2001 and 2008, the regulatory initiatives that followed. The second goal is to determine the status of the sector in Europe and to clarify if there is a convergence trend. Data and Methods The data used for the empirical analysis cover the period from 2005 to 2014, is focused on the twenty-seven (27) European Union countries. The data were collected from Bankscope and the initial sample was 8.115 individual banks. The data collected were financial, board of directors, ratings (banks and country), investment ratios, etc. The variables used are categorized into six groups of indicators or dimension: ratings (country and bank), size, ownership, corporate governance, capital adequacy or capital structure and loan growth. Since this is the first approach of a large sample and number of variables, the paper’s methodology is simple (descriptive statistics, cross-tabulation, mean and variance differences, etc.). Results The results show that the European banking sector has taken two major shocks and these shocks have left their mark financially, structurally and on their governance mechanisms. Major changes have taken place, but these changes don’t seem to re-enforce any convergence trend. Conclusions The stability of the sector is based on structural elements (competition, capital structure, regulation, etc.) and its performance. The results also show that the European banking sector is not homogenized. There are significant differences in size, spatial distribution, performance, financial structure, etc.