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Efficiency and Contestability in the Colombian Banking System


  • Christian Daude


  • Julien Pascal


Despite progress in the past decade, financial markets in Colombia remain relatively small and shallow. In particular the banking system suffers high intermediation costs, which limit constrains access to finance by households and firms. This paper explores some of the causes behind these intermediation costs. An accounting decomposition of the lending-deposit spread suggests that the levels of contestability and efficiency are low. A more in-depth analysis using stochastic frontier and data envelopment analyses confirm that the efficiency of the Colombian commercial banking system is low compared to other emerging markets and OECD economies with similar levels of development. Furthermore, econometric estimates of market contestability support the hypothesis that contestability in Colombia is subpar. Finally, the paper also explores some of the potential determinants of efficiency and contestability for a sample of the 24 countries over the period 2004 – 2013. This Working Paper relates to the 2014 OECD Economic Survey of Colombia. ( Efficience et contestabilité du marché bancaire en Colombie Malgré les progrès accomplis durant la décennie précédente, les marchés financiers colombiens demeurent peu développés. En particulier, le système bancaire affiche des coûts d’intermédiation élevés qui limitent l’accès financier des ménages et des entreprises. Ce papier explore quelques-uns des déterminants de ces coûts d’intermédiation. Une décomposition comptable de la différence entre les taux d’emprunt et les taux de prêt indique que l’efficience et la contestabilité sont limitées. Une étude approfondie reposant sur les méthodes de frontière stochastique et d’enveloppement des données confirme que l’efficience des banques commerciales colombiennes est faible comparée à d’autres pays émergents et à des pays de l’OCDE ayant le même niveau de développement. Par ailleurs, une estimation économétrique du degré de contestabilité du marché bancaire colombien révèle que celui-ci est bas. Finalement, les déterminants de l’efficience et de la contestabilité sont analysés pour un échantillon de 24 pays sur la période 2004 – 2013. Ce document de travail se rapporte à l’Étude économique 2014 de l’OCDE sur la Colombie (

Suggested Citation

  • Christian Daude & Julien Pascal, 2015. "Efficiency and Contestability in the Colombian Banking System," OECD Economics Department Working Papers 1203, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1203-en

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    References listed on IDEAS

    1. von Hagen, Jürgen & Hepp, Ralf, 2000. "Regional risksharing and redistribution in the German federation," ZEI Working Papers B 15-2000, University of Bonn, ZEI - Center for European Integration Studies.
    2. Jonathan Rodden & Erik Wibbels, 2010. "Fiscal Decentralization And The Business Cycle: An Empirical Study Of Seven Federations," Economics and Politics, Wiley Blackwell, vol. 22(1), pages 37-67, March.
    3. Aida Caldera Sánchez, 2013. "Improving Fiscal Federal Relations for a Stronger Mexico," OECD Economics Department Working Papers 1078, OECD Publishing.
    4. Luis Armando Galvis & Adolfo Meisel, 2012. "Convergencia y trampas espaciales de pobreza en Colombia: Evidencia reciente," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL Y URBANA 010287, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
    5. Luiz de Mello, 2008. "Estimating a fiscal reaction function: the case of debt sustainability in Brazil," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 271-284.
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    1. repec:eee:wdevel:v:99:y:2017:i:c:p:75-94 is not listed on IDEAS
    2. repec:eee:ememar:v:32:y:2017:i:c:p:52-73 is not listed on IDEAS

    More about this item


    banking system; contestability; contestabilité; data envelopment analysis; différence taux d’emprunt-taux de prêt; efficience; efficiency; lending-deposit spread; modèle de Panzar-Rosse; méthode de frontière stochastique; méthode d’enveloppement des données; Panzar-Rosse model; stochastic frontier analysis; système bancaire;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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