Spillover effects in the banking sector of emerging economies: a South Africa case study

Abstract

The aim of this article is to identify the presence of knowledge transfer and spillover effects and investigate the mechanism in which they materialise through efficiency and performance gained resulting from two foreign banks' majority and minority ownership in the South African banking (SA) sector. To achieve these objectives, performance and efficiency indicators of ABSA and the Standard Bank are collected and computed using t-statistics model. The results are analysed in light of interview outputs with several SA banking actors. The findings suggest that not only these two banks became more efficient after foreign participation in their ownership structure, but also the level of knowledge transfer depends on the type of ownership. In addition, the emergence of Capitec bank, a relatively new player in the SA banking sector contributed to the competition effect in the segment of retail-baking whereas the new entity Barclays/ABSA, a majority FDI, became a catalyst to competition effect in the segment of investment banking.

Harnessing Ai for Africa's Financial Fortification: A Review

“…In terms of banking, South Africa has the most developed banking system on the continent (Kshetri, 2019). The country's banking sector is dominated by four large banks: Standard Bank, FirstRand Bank, Absa Bank, and Nedbank (Mushonga, Arun, & Marwa, 2019;Pietrus, Nazarian, & Izadi, 2020). These banks have been profitable historically but are now facing increasing competition from new entrants into the market.…”