The issues related to bank competitiveness are subject to a growing interest of banking theoreticians and practitioners. In recent years a significant increase in intensity of competition in world's financial markets has been recorded. This poses difficult challenges to banks and forces them to introduce solutions improving their efficiency and, as a result, increasing their competitiveness. The banks' strategy toward increasing their efficiency includes mergers and acquisitions. The article attempts to indicate the trade-off between efficiency, competitiveness and financial stability, as founded in the carried empirical analyses. The results of reviews of technical efficiency and the level of competitiveness of Polish banking sector have been presented. Rapid technological progress was an additional factor, which had an effect on the pace and directions of change in the banking system. The period between 1997 and 2002 was marked by the development of e-commerce in banking technology. Little doubt, the development of information technology had a material effect on the competitiveness and efficiency of banks.

The article presents the results of a research project reviewing the level of competition for the Polish banking sector between 1997 and 2002. The project was carried out according the non-structural method presented i.a. by Gelos and Roldos (2002) in their paper Consolidation and Market Structure in Emerging Market Banking Systems (IMF Working Paper WP/02/186). The results of empirical analysis of the level of competition in the Polish banking sector indicated that the structure of the Polish banking market does not differ from that in developed countries and features monopolistic competition. In addition, the review of the level of competition and analyses of technical efficiency seem to indicate that the process of consolidation (like in the developed countries) has not resulted, as yet, in the decrease of the level of competition in the Polish banking sector. On the basis of empirical research and literature it has been concluded that it is difficult to determine a priori a definite level of permissible concentration.

Moreover, the carried out technical efficiency reviews suggest that the majority of commercial banks in Poland operated in the year 2002 within the range of increasing effects of scale, which indicates that there is still room for further mergers.