Banking Competition in the Czech Republic, Slovakia, and Poland

The aim of the paper is empirical estimation of the competitive conditions of the banking industry in the Czech Republic, Slovakia and Poland during the period 2000-2009. At the beginning of 1990s, the analyzed countries started to transform from centrally planned into market oriented economies and bank restructuring and privatisation has made huge strides during 1990s. We apply the New Empirical Industrial Organization approach, especially the Panzar-Rosse model to estimates the level of competition during the period 2000-2009. We estimate H statistic for a panel of banks, which represent almost 85% of the market in these countries. The paper also measures and compares the degree of banking competition in two sub-periods, 2000-2004 and 2005-2009, in order to investigate development of the competitive structure of the banking industry in countries. While the Czech banking market can be described as perfectly competitive during the period 2000-2004, the intensity of competition decreased in the second sub-period and the market can be characterized as one of monopolistic competition in 2005-2009. The monopolistic competition in the Czech banking market was also revealed in the full sample 2000-2009. The Poland's banking sector can be characterized as a monopolistic competition in the whole period as well as in the first sub-period. By contrast, we revealed a perfect competition in the second sub-period. In Slovakia, banks operated under a monopoly structure in the full sample as well as in the first sub-period; in the second sub-period the banking industry is characterized as a monopolistic competition. While the competitive conditions worsened over time analyzed in the Czech banking sector, the competitive conditions increased in the Polish and Slovak banking sector.