<span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">Banking sector efficiency in a country is directly influenced by regulations that set up by the banking authorities in <span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">that country, especially what kind of banking industry structure that regulator intend by those regulation. Indonesian <span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">Banking Architecture which encourage mergers and acquisitions of smaller banks, has a clear target that Indonesian <span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">banking industry should have a leaner industry structure with fewer number of banks but with relatively large assets,<br /><span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">higher industry concentration higher and more tighter competition. This policy is driven by the regulator’s belief that <span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">Indonesian banks has not achieved its economies of scales and competition is relatively low so that the Indonesian <span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">banking operating costs are among the highest among Asian countries. The opposite actually happened in the USA <span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">where the regulator is precisely to prevent mergers between major banks due to economies of scale bank in the United <span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">States has been exceeded. The reserach results showed the group of large banks in Indonesia is more efficient than <span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">medium and small banks and the efficiency is more due to economies of scale than caused by the concentration of the <span style="color: #231f20; font-family: Calibri; font-size: 11pt; font-style: normal; font-variant: normal;">industry and the level of competition between banks.<br /></span></span></span></span></span></span></span></span></span></span></span>