Purpose -

Private banking market is one of the most important sectors in all economies. Banks are institutions that inject money in the economy and help to boost it when there are problems in some markets, especially in productive sectors. In this way, analysing the competition in this sector is an important tool for policy makers as non-competitive behaviour could affect the financial system and economy.

Design -

The aim of this paper is to measure the degree of competition in the Ecuadorian private banking sector divided by size, from 2000-2015, using panel data collected by the official regulator institution.

Methodology -

We applied the model proposed by Panzar and Rosse (1987) and the H-statistic using a reduced price and revenue equation estimated by POLS, Fixed Effects, Random Effects, Feasible Generalized Fixed Effects (FGLS) and Panel Correction Standard Errors (PCSE).

Findings -

We show that the most appropriate technique is PCSE due to the presence of some problems in data such as heteroskedasticity and autocorrelation. We also found robust evidence supporting that large banks compete in a monopolism market, medium and small operate in a monopolistic competition; also, Ecuadorian large, medium and small banks are in long-run equilibrium.