Working paper

The changing landscape of financial markets in Europe, the United States and Japan

We compare the structure of the financial sectors of the EU27, Japan and the United States, looking at a set of 23 indicators.

Publishing date
17 March 2013

We compare the structure of the financial sectors of the EU27, Japan and the United States, looking at a set of 23 indicators.

We find a large variation within the European Union in the structure of the financial sector. Using principal components analysis, we identify robust groups of EU countries. One group consists of the eastern European members that entered the EU more recently.These have substantially smaller financial sectors than the old member states. A second group can be classified as market-based (MBEU) and the third group is more bank-based (BBEU).

We compare US, MBEU, BBEU, Eastern EU and Japan with the following main results. First, the groups within Europe are geographically related. Second, in many indicators, MBEU countries are closer to the (market-based) US, while BBEU countries more closely resemble Japan. Paradoxically, however, market-based EU countries also have large banking sectors. Banks in market-based countries have larger cross-border assets and liabilities, and derive a larger fraction of their income from fees, rather than interest income, than banks in bank-based countries. Finally, for most indicators, the ordering of groups of countries is quite stable over time, but while the crisis has had no impact on the relative ordering of the groups, it has slightly widened the gap between the US and all EU regions insome respects. We also find that during the crisis, substitution between market-based and bank-based sources of finance occurred in the US, and to a lesser extent in MBEU and BBEU countries.

About the authors

  • Michiel Bijlsma

    Michiel heads the competition and regulation department at the Netherlands Bureau for Economic Policy Analysis (CPB). The sector comprises three research programs: Financial Markets, Health Care, and Innovation and Science. He has a PhD in theoretical physics from the University of Utrecht, and is a visiting fellow at Tilec, University of Tilburg. Michiel Bijlsma joined Bruegel as a visiting fellow in January 2012 and has been affiliated as a Non-Resident Fellow until 2016.

    Michiel’s research is in the areas of Corporate Governance, Banking, and Health Care markets. He has co-authored popular Dutch books on the 2007-2008 financial crisis and the current European debt crisis. Prior to his work for CPB, Michiel worked as a senior economist at the Netherlands Competition Authority on high-profile cases on fee structures of debit card payment systems and as a consultant for international firms at Ernst & Young risk management.

  • Gijsbert Zwart

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