Please use this identifier to cite or link to this item:
Crystal, Jennifer S.
Dages, B.Gerard
Goldberg, Linda S.
Year of Publication: 
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 137
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.
Document Type: 
Working Paper

Files in This Item:
129.78 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.