Competition in the Dutch consumer credit market

Toolsema, Linda A.

doi:10.1016/s0378-4266(02)00206-6

Cited by 53 publications

(49 citation statements)

References 19 publications

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“…16 Our results are in line with other empirical investigations, such as on competition in the Dutch market for revolving consumer credit, which showed that this market is competitive indeed (see Toolsema, 2002). 17 The UK has over 100 mortgage lenders.…”

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confidence: 85%

A new approach to measuring competition in the loan markets of the euro area

et al. 2011

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NON-TECHNICAL SUMMARYThis paper investigates the measurement of competition in the EU banking sector. Bank competition is pivotal to monetary policy as it may affect the way changes in the policy rates of the European Central Bank (ECB) are passed on to the interest rates that banks offer their customers.The paper uses a new approach, the so-called Boone indicator, to estimate competition in the loan markets of the euro area. To our knowledge, this is the first paper which applies this method to the banking market. This indicator measures the effect of efficiency on performance in terms of profits or market shares. The idea underlining the Boone indicator is that competition enhances the performance of efficient firms and impairs the performance of inefficient firms, which is reflected in lower profits or smaller market shares.Our approach is innovative in the sense that this method allows measurement of competition not only for the entire banking market, but also for separate product markets, such as We apply the Boone indicator to the loan markets of the five major countries in the euro area and, for comparison, to the UK, the US and Japan over 1994-2004. Our findings indicate that the US had the most competitive loan market, whereas Germany and Spain were among the best competitive EU markets. The German results seem to be driven partly by a competitive commercial banking sector reflecting the distinct nature of its "three-pillar" banking system. In Spain, competition remained strong and relatively stable over the full sample period, indicating the progress the Spanish banking system has made since the major liberalisation reforms in the late 1980s and early 1990s. The Netherlands took up a more intermediate position among the countries in our sample, despite having a relatively concentrated banking market dominated by a small number of very large players. Italian competition declined significantly over time, which may be due to the partial reconstitution of market power by the banking groups formed in the early 1990s. French and British loan markets were less competitive overall. In Japan, competition in loan markets was found to increase dramatically over the years, in line with the consolidation and revitalisation of the Japanese banking industry in recent years. ECB Working Paper Series No 768June 2007 The paper also measures competition among specific types of banks. Commercial banks, which are more exposed to competition from foreign banks and capital markets, tend to be more competitive, particularly in Germany and the US, than savings and cooperative banks, which typically operate in local markets. An exception is Japan, where competition among savings and cooperative banks was considerably stronger than competition between commercial banks. This may indicate the adverse impact of the banking crises on bank competition, as the commercial banks were particularly hard-hit by the severe banking crisis that engulfed Japan during the 1990s.All in all, according to the Boone indicator, competitive condition...

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confidence: 85%

A new approach to measuring competition in the loan markets of the euro area

et al. 2011

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“…The paper is in line with earlier literature on competition in the Dutch loan market (e.g. Den Butter et al (1977); Fase (1995); Swank (1995); Toolsema (2002)). The paper of Den Butter et al (1977) is partly related to the present one, as it gives an econometric model of the Dutch mortgage market with a demand and interest setting equation.…”

Section: Introductionsupporting

confidence: 89%

“…Swank (1995) concludes that the mortgage market still has an oligopolistic structure in the Netherlands, although competition has intensified significantly in recent years. Toolsema (2002), on the other hand, finds indications for perfect competition among banks in the Dutch consumer credit market.…”

Section: Introductionmentioning

confidence: 99%

Measuring Transparency in the Dutch Mortgage Market

Hassink

Leuvensteijn

2007

De Economist

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SummaryThis paper is an empirical study of pricing in the Dutch mortgage market. For a narrowly defined set of endowment mortgages (with a fixed lending rate of 10 years), we find that the price dispersion within lenders is larger than the dispersion across lenders. Prices remain dispersed across lenders, even after controlling for characteristics of the borrower, the municipality and the government bond rate. Apparently, the mortgage market is not fully transparent, which impedes competition in the mortgage market. We also find that the price dispersion for mortgages sold by banks is smaller than that for mortgages sold by other lenders. A likely explanation is that lenders using middlemen have higher agency costs.

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“…This approach was first applied to the banking industry by Shaffer (1989Shaffer ( , 1993 for the U.S. loan market and the Canadian banking industry, respectively. Applications of this approach to European banking are numerous and include studies on Finnish banking by Suominen (1994), on various European countries by Neven and Röller (1999) and Bikker and Haaf (2002), on Italian banking by Coccerese (1998) and Angelini and Cetorelli (2003), on Dutch consumer credit markets by Toolsema (2002), and on Portuguese banking by Canhoto (2004) 6 . Most of this literature finds little evidence of market power in European banking, the exception being Neven and Röller (1999) who find significant monopoly collusive behaviour when they consider the corporate and household loan market across six countries between 1981 and 1989.…”

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confidence: 99%

Cross-country comparisons of competition and pricing power in European banking

Carbó

Humphrey

Maudos

et al. 2009

Journal of International Money and Finance

346

189

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Studies of banking competition and competitive behaviour both within and across countries typically utilise only one of the few measures that are available. In trying to assess the relative competitive position of banking markets in 14 European countries, we find that the existing indicators of competition often give conflicting predictions, both across countries and over time. Seeking greater consistency, we attempt to separate bank pricing power from other, non-core, influences embodied in competition measures. While there is some improvement in cross-country consistency, the main result is that our measure of bank pricing power suggests that banking market competition in Europe may well be stronger than implied by traditional measures and analysis.

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Competition in the Dutch consumer credit market

Cited by 53 publications

References 19 publications

A new approach to measuring competition in the loan markets of the euro area

A new approach to measuring competition in the loan markets of the euro area

Measuring Transparency in the Dutch Mortgage Market

Cross-country comparisons of competition and pricing power in European banking

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