Deregulation and productivity decline: The case of Spanish savings banks

During the 1980s many regulatory constraints limiting competition in Spanish banking were relaxed or removed, although deregulation came later to savings banks than to the rest of the banking sector. Two consequences of partial deregulation of savings banks have been a rapid growth in branching activity, much of it geographically dispersed, and a burst of merger activity. In this paper we investigate productive efficiency, and total factor productivity change, in Spanish savings banks over the 1986-1991 post-deregulation period. Neither branching nor mergers provide an adequate explanation for the magnitude or the nature of the productivity decline we observe over the period.