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Foreign Banks' Entry and Departure: The Recent Brazilian Experience (1996-2006)

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Author Info
Pedro Fachada
Abstract

There is a broad literature documenting the recent trend towards a larger foreign banking presence in both mature and emerging markets. Less documented are the few situations where banking internationalization has contracted. Brazil is one such case. After a large-scale entry in the late 90s, foreign banks have retreated, being absorbed by their domestic competitors. This paper examines these opposite trends and associates de-internationalization mainly with lower relative profitability of foreign firms. Bank-level panel data investigates the determinants of earnings and costs according to ownership, providing evidence that greater foreign presence contributed to curb domestic banks’ costs, but not their profitability. This assessment is consistent with widespread evidence that internationalization forces local banks to operate more efficiently.

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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 164.

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Date of creation: Jun 2008
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Handle: RePEc:bcb:wpaper:164

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  8. de Haas, Ralph & van Lelyveld, Iman, 2006. "Foreign banks and credit stability in Central and Eastern Europe. A panel data analysis," Journal of Banking & Finance, Elsevier, vol. 30(7), pages 1927-1952, July. [Downloadable!] (restricted)
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  9. Clarke, George & Cull, Robert & Martinez Peria, Maria Soledad & Sanchez, Susana M, 2005. "Bank Lending to Small Businesses in Latin America: Does Bank Origin Matter?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 83-118, February.
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  19. Yeyati, Eduardo Levy & Micco, Alejandro, 2007. "Concentration and foreign penetration in Latin American banking sectors: Impact on competition and risk," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1633-1647, June. [Downloadable!] (restricted)
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