The impact of the banking sector concentration on the labour cost in Polish banks in the years 1997-2014

Abstract

The paper presents the results of the examination of the relationship between the average
labour costs and the degree of concentration of the banking sector in Poland in 1997-2014. Using the
quarterly banking and macroeconomic data and the multivariate regression model it was found that
banks lower average labour cost with the higher concentration of the banking sector. Whereas these
costs increased with decreasing concentration and increasing level of competition. The higher average
labour costs occurred when the growth rate of banking sector assets exceeded the GDP growth, generating
increased competitive pressure, and when banks requested more funding from deposits of the nonfinancial
sector. Accelerated economic growth and the accompanying technological developments allow
banks to lower labor costs, due to greater automation of banking activities, the use of internet and mobile
banking, as well as modern payment systems.