Cost behaviour in the banking industry: evidence from a Greek commercial bank

An analysis of the Greek banking industry shows that competition, technology, and location do not apparently influence the behavior of the long-run cost of a bank. Other findings of the analysis are: 1. The production process is nonhomothetic, nonhomogeneous, and nonseparable. 2. A bank realizes sufficient economies of scope because of the observed jointness. 3. Marginal cost curves are U-shaped, with the coefficient of the economies to scale ranging from 0.34 to 1.23 per branch. 4. All 3 marginal cost curves have a horizontal segment in their lower part, indicating the existence of reserve capacity. 5. The most efficient branches employ from 6 to 10 persons and produce 3,000 to 4,000 new deposit accounts, 500 to 1,000 new loans, and 200,000 to 1,000,000 ancillary service transactions a year. The evidence supports the view that the Greek banking industry has an oligopolistic structure, with a natural monopoly arising in the minor urban areas.