The purpose of this thesis has been to investigate evidence of economies of scale and scope in various European banking markets. The thesis has also examined the cost implications from hypothetical bank mergers both within the French, German, Italian and Spanish banking markets and cross-border in the EU. The analysis has been prompted by claims that substantial cost savings could be expected as the result of the EU's single market programme in the banking area. Economies of scale and scope, a substantial part of industrial organisations literature, have been widely examined in the US banking system, although little empirical work to date has been undertaken on European banking markets. This thesis aimed to rectify this imbalance in the literature by providing a detailed, in-depth and original analysis of scale and scope economies as well as investigating the cost implications of hypothetical bank mergers. Overall, the results suggest noticeable differences in cost characteristics across European banking markets and strong evidence of economies of scale and scope at the plant (or branch) level in all but the Spanish market. Cost savings appear to occur mainly through the increased average size of established banks' branches rather than through adding new branches. The findings appear to indicate that scale and scope economies will be important in generating economic gains to EU banking markets under the Single Market programme. The evidence from hypothetical mergers within the individual domestic banking markets appears to be that mergers between large banks can generate substantial cost savings or increases depending on the particular merger partners. In general, the results indicate that opportunities for cost saving mergers seem to be greater in Germany and Spain than in the French and Italian banking markets. The prospects for cost saving big-bank mergers in Italy, appear to be limited. The selective results for the hypothetical mergers between the 20 largest banks within domestic banking markets imply that substantial cost savings can be generated from mergers between top commercial banks in Germany. For the Italian banking market, the analyses shows that the majority of hypothetical mergers indicate an increase in predicted total costs. Moreover, the findings from Spain and France are less clear-cut. The evidence from our analysis of hypothetical cross-border mergers in the EU indicates only limited opportunities for costs saving from big bank mergers and that such mergers are more likely to result in an increase in total costs.