Convergence of Bank Efficiency in Emerging Markets: The Central and Eastern European Countries Experience

Alin Marius Andries, Alexandru Ioan Cuza University of Iasi
Bogdan Capraru

Abstract

In our study we investigate the impact of European Union integration process on banks efficiency and the convergence of cost efficiency across banking systems from Central and Eastern European countries from 2004 to 2010. We observe large differences of level of cost efficiency between national banking systems and we notice an increase in banking efficiency for all banking systems until 2008, but starting with 2009 the evolution of the average scores of cost efficiency declined. The results provide evidence of β-convergence and σ-convergence in term of cost efficiency among the banking systems, especially during period 2009-2010. Also, the convergence process occurs from the banking systems with lower average efficiency than mean score of all countries – caching up process, as well from the banking systems with higher average efficiency than the mean score of all countries – lagging behind process.