How foreign participation and market concentration impact bank spreads: evidence from Latin America

Maria Soledad Martinez Peria and Ashoka Mody

No 3210, Policy Research Working Paper Series from The World Bank

Abstract: 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.

Keywords: Payment Systems&Infrastructure; Banks&Banking Reform; Decentralization; Financial Intermediation; Banking Law; Financial Intermediation; Banking Law; Municipal Financial Management; Financial Crisis Management&Restructuring; Banks&Banking Reform (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-com and nep-fin
Date: 2004-02-01
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Journal Article: How Foreign Participation and Market Concentration Impact Bank Spreads: Evidence from Latin America (2004)
Journal Article: How foreign participation and market concentration impact bank spreads: evidence from Latin America (2004)
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