Advanced Search
MyIDEAS: Login

Global banks, local crises: bad news from Argentina

Contents:

Author Info

  • Marco Del Negro
  • Stephen Kay

Abstract

Banking crises have been a recurrent phenomenon in Latin America over the past few decades. Some have argued that the internationalization of the banking sector has ushered in a new era: what used to be systemic risk from the perspective of local banks with undiversified portfolios might no longer be systemic from the standpoint of large international banks. ; Argentina's experience shows that the presence of international banks was not enough to prevent local banking crises and sizable losses to depositors. The "bad news" from Argentina, this article argues, is that depositors in emerging markets may not reap the full benefits of international portfolio diversification because international banks have limited liability, at least under some circumstances-for instance, when the local government heavily intervenes in the banking system. The authors emphasize that while the limited-liability feature of international banks may seem bad ex post-and, of course, it is from the perspective of Argentine depositors-this feature may well be desirable, perhaps even necessary, ex ante. ; The article first presents evidence of the globalization of the banking sector in Latin America and the dramatic increase of the phenomenon in the late nineties. After reviewing the literature on the pros and cons of international banks in emerging markets, the authors focus on the legal issues behind the limited-liability feature. The authors examine the new evidence that Argentina's recent experiences provide and conclude by analyzing the pros and cons of the limited-liability feature.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.frbatlanta.org/filelegacydocs/delnegro_kay03.pdf
Download Restriction: no

Bibliographic Info

Article provided by Federal Reserve Bank of Atlanta in its journal Economic Review.

Volume (Year): (2002)
Issue (Month): Q3 ()
Pages: 89-106

as in new window
Handle: RePEc:fip:fedaer:y:2002:i:q3:p:89-106:n:v.87no.3

Contact details of provider:
Postal: 1000 Peachtree St., N.E., Atlanta, Georgia 30309
Phone: 404-521-8500
Email:
Web page: http://www.frbatlanta.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Argentina ; Banks and banking ; Banks and banking; International;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Kane, Edward J., 2000. "Capital movements, banking insolvency, and silent runs in the Asian financial crisis," Pacific-Basin Finance Journal, Elsevier, vol. 8(2), pages 153-175, May.
  2. Adolfo Barajas & Natalia Salazar & Roberto Steiner, 1999. "Foreign Investment in Colombia's Financial Sector," IMF Working Papers 99/150, International Monetary Fund.
  3. Jennifer S. Crystal & B. Gerard Dages & Linda S. Goldberg, 2001. "Does foreign ownership contribute to sounder banks in emerging markets? the Latin American experience," Staff Reports 137, Federal Reserve Bank of New York.
  4. B. Gerard Dages & Linda Goldberg & Daniel Kinney, 2000. "Foreign and domestic bank participation in emerging markets: lessons from Mexico and Argentina," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 17-36.
  5. Demirguc-Kunt, Asl' & Kane, Edward J., 2001. "Depositinsurance around the globe : where does it work?," Policy Research Working Paper Series 2679, The World Bank.
  6. Caprio, Gerard, Jr. & Honohan, Patrick, 1999. "Beyond capital ideals : restoring banking stability," Policy Research Working Paper Series 2235, The World Bank.
  7. María Soledad Martínez-Peria & Sergio Schmukler, 2002. "Do Depositors Punish Banks for Bad Behavior? Market Discipline, Deposit Insurance, and Banking Crises," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 5, pages 143-174 Central Bank of Chile.
  8. Albert S. Kyle, 2001. "Contagion as a Wealth Effect," Journal of Finance, American Finance Association, vol. 56(4), pages 1401-1440, 08.
  9. Torsten Sløk & Hali J. Edison & Luca Antonio Ricci & Ross Levine, 2002. "International Financial Integration and Economic Growth," IMF Working Papers 02/145, International Monetary Fund.
  10. Jackson, William III & Eisenbeis, Robert A., 1997. "Geographic integration of bank deposit markets and restrictions on interstate banking: A cointegration approach," Journal of Economics and Business, Elsevier, vol. 49(4), pages 335-346.
  11. Claessens, Stijn & Glaessner, Tom, 1998. "The internationalization of financial services in Asia," Policy Research Working Paper Series 1911, The World Bank.
  12. Eric S. Rosengren & Joe Peek, 2000. "Collateral Damage: Effects of the Japanese Bank Crisis on Real Activity in the United States," American Economic Review, American Economic Association, vol. 90(1), pages 30-45, March.
  13. Asli Demirgüç-Kunt & Enrica Detragiache, 1997. "The Determinants of Banking Crises - Evidence from Developing and Developed Countries," IMF Working Papers 97/106, International Monetary Fund.
  14. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," World Bank Economic Review, World Bank Group, vol. 13(2), pages 379-408, May.
  15. Larry D. Wall, 1993. "Too-big-to-fail after FDICIA," Economic Review, Federal Reserve Bank of Atlanta, issue Jan, pages 1-14.
  16. Linda S. Goldberg, 2001. "When is U.S. bank lending to emerging markets volatile?," Staff Reports 119, Federal Reserve Bank of New York.
  17. Clarke, George & Cull, Robert & Martinez Peria, Maria Soledad & Sanchez, Susana M., 2001. "Foreign bank entry - experience, implications for developing countries, and agenda for further research," Policy Research Working Paper Series 2698, The World Bank.
  18. Martinez Peria, Maria Soledad & Schmukler, Sergio L., 1999. "Do depositors punish banks for"bad"behavior? : market discipline in Argentina, Chile, and Mexico," Policy Research Working Paper Series 2058, The World Bank.
  19. Levine, Ross, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bank for International Settlements, 2007. "Evolving banking systems in Latin America and the Caribbean: challenges and implications for monetary policy and financial stability," BIS Papers, Bank for International Settlements, number 33, 6.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedaer:y:2002:i:q3:p:89-106:n:v.87no.3. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.