Global banks, local crises: bad news from Argentina
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.
Volume (Year): (2002)
Issue (Month): Q3 ()
|Contact details of provider:|| Postal: |
Web page: http://www.frbatlanta.org/
More information through EDIRC
|Order Information:|| Email: |
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.:
- Torsten SlÃ¸k & Hali J. Edison & Luca Antonio Ricci & Ross Levine, 2002.
"International Financial Integration and Economic Growth,"
IMF Working Papers
02/145, International Monetary Fund.
- Edison, Hali J. & Levine, Ross & Ricci, Luca & Slok, Torsten, 2002. "International financial integration and economic growth," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 749-776, November.
- Hali J. Edison & Ross Levine & Luca Ricci & Torsten Slok, 2002. "International Financial Integration and Economic Growth," NBER Working Papers 9164, National Bureau of Economic Research, Inc.
- Adolfo Barajas & Natalia Salazar & Roberto Steiner, 1999. "Foreign Investment in Colombia's Financial Sector," IMF Working Papers 99/150, International Monetary Fund.
- 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.
- Linda Goldberg & B. Gerard Dages & Daniel Kinney, 2000. "Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina," NBER Working Papers 7714, National Bureau of Economic Research, Inc.
- Asli DemirgÃ¼Ã§-Kunt & Enrica Detragiache, 1997. "The Determinants of Banking Crises; Evidence From Developing and Developed Countries," IMF Working Papers 97/106, International Monetary Fund.
- Maria Soledad Martinez Peria, 2001.
"Do Depositors Punish Banks for Bad Behavior? Market Discipline, Deposit Insurance, and Banking Crises,"
Journal of Finance,
American Finance Association, vol. 56(3), pages 1029-1051, 06.
- 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 (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 5, pages 143-174 Central Bank of Chile.
- Linda S. Goldberg, 2002.
"When Is U.S. Bank Lending to Emerging Markets Volatile?,"
in: Preventing Currency Crises in Emerging Markets, pages 171-196
National Bureau of Economic Research, Inc.
- Linda S. Goldberg, 2001. "When Is U.S. Bank Lending to Emerging Markets Volatile?," NBER Working Papers 8209, National Bureau of Economic Research, Inc.
- Linda S. Goldberg, 2001. "When is U.S. bank lending to emerging markets volatile?," Staff Reports 119, Federal Reserve Bank of New York.
- Demirguc-Kunt, Asli & Huizinga, Harry, 1998.
"Determinants of commercial bank interest margins and profitability : some international evidence,"
Policy Research Working Paper Series
1900, The World Bank.
- 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.
- Caprio, Gerard, Jr. & Honohan, Patrick, 1999. "Beyond capital ideals : restoring banking stability," Policy Research Working Paper Series 2235, The World Bank.
- 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.
- Larry D. Wall, 2010.
"Too-big-to-fail after FDICIA,"
Federal Reserve Bank of Atlanta.
- Levine, Ross, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
- 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.
- 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.
- 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.
- Edward J. Kane, 2000.
"Capital Movements, Banking Insolvency, and Silent Runs in the Asian Financial Crisis,"
NBER Working Papers
7514, National Bureau of Economic Research, Inc.
- 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.
- Claessens, Stijn & Glaessner, Tom, 1998. "The internationalization of financial services in Asia," Policy Research Working Paper Series 1911, The World Bank.
- Demirguc-Kunt, Asl' & Kane, Edward J., 2001.
"Depositinsurance around the globe : where does it work?,"
Policy Research Working Paper Series
2679, The World Bank.
- Asli Demirguc-Kunt & Edward J. Kane, 2002. "Deposit Insurance Around the Globe: Where Does It Work?," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 175-195, Spring.
- Edward J. Kane & Asli Demirguc-Kunt, 2001. "Deposit Insurance Around the Globe: Where Does it Work?," NBER Working Papers 8493, National Bureau of Economic Research, Inc.
- Stockman, Alan C, 2001.
"Optimal Central Bank Areas, Financial Intermediation, and Mexican Dollarization,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 33(2), pages 648-66, May.
- Alan C. Stockman, 2001. "Optimal central bank areas, financial intermediation, and Mexican dollarization," Proceedings, Federal Reserve Bank of Cleveland, pages 648-668.
- Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
- Albert S. Kyle, 2001. "Contagion as a Wealth Effect," Journal of Finance, American Finance Association, vol. 56(4), pages 1401-1440, 08.
- 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.
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 references are entirely missing, you can add them using this form.