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Competition in the Colombian Banking Sector

Author

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  • Perez-Reyna, David
  • Rodríguez Barraquer, Tomás
  • Tovar, Jorge

Abstract

In this paper, we analyze the competition in the Colombian banking sector using bank-level monthly balance sheet information. We estimate the changes in measures of market power due to the exogenous introduction of a liquidity regulation. Our results suggest that introducing a net stable funding ratio increased the Lerner index in the short term, thus signaling a higher exercise of market power. We rationalize these changes in a simple theoretical model that allows us to analyze the tightening of liquidity requirements for banks. Our empirical results are consistent with banks with higher market power in the loan market than in the deposit market.

Suggested Citation

  • Perez-Reyna, David & Rodríguez Barraquer, Tomás & Tovar, Jorge, 2025. "Competition in the Colombian Banking Sector," IDB Publications (Working Papers) 14045, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:14045
    DOI: http://dx.doi.org/10.18235/0013441
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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