How Foreign Participation and Market Concentration Impact Bank Spreads: Evidence from Latin America

Increasing foreign participation and high concentration levels characterize the recent evolution of banking sectors' market structures in developing countries. The authors analyze the impact of these factors on Latin American bank spreads during the late 1990s. Their results suggest that foreign banks were able to charge lower spreads relative to domestic banks. This was more so for de novo foreign banks than for those that entered through acquisitions. The overall level of foreign bank participation seemed to influence spreads indirectly, primarily through its effect on administrative costs. Bank concentration was positively and directly related to both higher spreads and costs.

Bibliographic Details

Main Authors:	Martinez Peria, Maria Soledad, Mody, Ashoka
Format:	Policy Research Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, D.C. 2004-02
Subjects:	FOREIGN BANKS, FINANCIAL INTERMEDIATION, INTEREST RATES, SPREAD, SPILLOVER EFFECTS, INTEREST MARGINS, MARKET CONCENTRATION, INTEREST INCOME PAYMENTS, MERGERS & ACQUISITIONS, LIQUID ASSET PORTFOLIOS, ACCOUNTING, ACCOUNTING STANDARDS, ACCOUNTS, ADMINISTRATIVE COSTS, BALANCE SHEET, BANK ASSETS, BANK CLOSURES, BANK CREDIT, BANK LENDING, BANK LENDING RATES, BANK LIQUIDITY, BANK LOANS, BANK REGULATION, BANKING AUTHORITIES, BANKING INDUSTRY, BANKING SECTOR, BANKING SYSTEM, BANKING SYSTEMS, BONDS, CAPITAL MARKETS, CONSOLIDATION, COST OF CAPITAL, CREDIT RISK, DEALERS, DEFAULT RISK, DEMONSTRATION EFFECTS, DEPOSITS, DEVELOPMENT ECONOMICS, ECONOMICS, EMPIRICAL EVIDENCE, FINANCIAL CRISES, FINANCIAL ECONOMICS, FINANCIAL INSTITUTIONS, FINANCIAL MARKET, FINANCIAL MARKET LIBERALIZATION, FINANCIAL NEEDS, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL STRUCTURE, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FOREIGN ENTRY, INCOME, INFLATION, INTEREST RATE, INTERNATIONAL FINANCIAL STATISTICS, LATIN AMERICAN, LIQUID ASSETS, MARGINS, MONETARY POLICY, MONEY MARKET, NET WORTH, NEW ENTRANTS, OFFSETTING, OPERATING COSTS, POLICY RESEARCH, PRIVATE BANKS, PROFITABILITY, PUBLIC BANKS, PURCHASES, QUANTITATIVE ANALYSIS, RESERVE REQUIREMENTS, SAVINGS, SECURITIES FOREIGN BANKS,
Online Access:	http://documents.worldbank.org/curated/en/2004/02/5296843/foreign-participation-market-concentration-impact-bank-spreads-evidence-latin-america http://hdl.handle.net/10986/14205
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