Reconstructions in financial field had been executed through merger and acquisition in order to overcome financial crisis since 1997. However, recent bank consolidation has aimed at merger to improve competitive power of banks since 2001. This consolidation has increased market concentration so that bank industry could be classified as concentrated market. In this concentrated market, it is important to analyze efficiency of large sized banks as well as it of normal sized banks for improvement of competitive power. If efficiency of large sized banks decreased more than it of normal sized banks, while efficiency of normal sized banks itself is decreasing, according to a traditional view, the merger of banks might weaken the competitive power in bank industry henceforth.

From an analysis on the efficiency of bank industry through Data Envelopment Analysis, it is concluded that the bank consolidation actually improved efficiency by and large. Moreover, after the consolidation, the efficiency of banks surpasses the highest level of it in pre-financial-crisis period. Especially the efficiency of five large sized banks has been improved relatively higher than it of normal sized banks. It is also found that there is a direct correlation between the improvement of efficiency and a market share, which means an efficient bank captures bigger market share. Based on these analyses, it is assumed that efficient competition in bank industry is carried out.

Furthermore, the improvement of efficiency also raises financial safety, improving profitability as well as soundness in a loan business. Therefore, under the current condition that market concentration doesn’t come into question yet, it is suggested that the consolidation fulfilled by government, aiming at improvement of international competitive power, may not lead decrease in efficiency in bank industry due to market concentration.