The Evolution of Scope Economies in European Banking Industry

Abstract

The global financial crisis has raised new policy debates regarding the bank's size, especially among the largest banks. Using nonparametric, local-linear methods, we provide new estimates of scope economies in cost, revenue, and profit for European commercial banks during 2000–2020. Our findings reveal that a substantial proportion of banks demonstrated economies of scope (EOS) annually: approximately 45% in cost, at least 61% in revenue, and no less than 67% in profit. These findings indicate that EOS may partly account for the sustained growth and expansion of European banks during this period.