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http://hdl.handle.net/10419/60633
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| Title: | | Does foreign ownership contribute to sounder banks in emerging markets? The Latin American experience  |
| Authors: | | Crystal, Jennifer S. Dages, B.Gerard Goldberg, Linda S. |
| Issue Date: | | 2001 |
| Series/Report no.: | | Staff Report, Federal Reserve Bank of New York 137 |
| Abstract: | | Foreign bank entrants into emerging markets are usually thought to improve the condition and performance of acquired institutions, and more generally to enhance local financial stability. We use bank-specific data for a range of Latin American countries since the mid-1990s to address elements of this claim. Across the seven largest countries, we find that the financial strength ratings of local banks acquired by foreign entities generally show a slight improvement relative to their domestic counterparts. Our more in-depth case studies of Chile, Colombia, and Argentina do not indicate striking differences in health between larger foreign and domestic retail-oriented banks (although state banks are noticeably weaker). However, foreign banks often have higher average loan growth, higher average provisioning expense, and greater loss-absorption capacity. These results suggest that foreign ownership may provide important positive influences on the stability and development of emerging market banking systems. |
| JEL: | | F3 F4 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Staff Reports, Federal Reserve Bank of New York
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