e impact on profitability. In the second case (i.e. unanticipated inflation) banks may be slow in adjusting their interest rates resulting ina faster increase of bank costs than banks revenues. This will consequently have a negative impact on bank profitability. We finally examine how the performance of banks is related to the relative development of the banking industry and the stock market using the ratios stock market capitalization to GDP (MACGDP), stock market capitalization to total assets of deposit money banks (MACPASS), total assets of deposit money banks to GDP (ASSGDP) and banking industry concentration (CONC). MACPASS reflects plementarity or substitutability between bank and stock market financing, while ASSGDP and MACGDP measure the overall level of development of the banking
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