Foreign banks in Latin America: A paradoxical result

Do foreign banks increase competition? Evidence from emerging Asian and Latin American banking markets

“…The fact that in Mexico competition among domestic banks has increased while overall competition has followed a downward trend once foreign banks are also included in the sample is consistent with the results of previous studies. For example, Moguillansky et al (2004) argue 14 We find that the measures of foreign bank penetration in terms of assets and loans are highly correlated. This is not surprising because loans are the main component of banks' total assets in these economies.…”

“…These reform efforts also allowed foreign banks additional freedom and to engage in a broader scope of activities, particularly as business strategies of foreign banks shifted towards universal banking (Moguillansky et al, 2004). As a result, foreign banks have been playing an increasingly crucial role in restructuring and internationalizing banking markets in these economies.…”

Institutional development and foreign banks in Chile

“…Jeon, Olivero, and Wu (2011) also conclude that foreign banks in Asia and Latin America increase competition. However, Moguillansky, Stuart, and Vergara (2004) argue that foreign banks can exploit the economic conditions in the host country and increase their net interest margin.…”

Foreign Ownership and Market Power in Banking: Evidence from a World Sample

“…The empirical evidence on the influence of the mode of entry on various aspects of banking is substantial. For example, in Mexico during the so-called tequila crisis, foreign banks entered almost entirely through the acquisition of existing domestic banks, thus preserving the oligopolistic structure of the industry (Moguillansky, Stuart, and Vergara, 2004). Also, Havrylchyk (2006) shows that Polish banks acquired by foreign banks do not show improvements in efficiency, whereas greenfield entrants tend to be more efficient than their domestic counterparts.…”