FDI in the banking sector
By: Beatriz de Blas, Katheryn Niles Russ
Contributors: Russ, Katheryn Niles, 1973-; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16029; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16029.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "It is a well known quandry that when countries open their financial sectors, foreign-owned banks appear to bring superior efficiency to their host markets but also charge higher markups on borrowed funds than their domestically owned rivals, with unknown impacts on interest rates and welfare.  Using heterogeneous, imperfectly competitive lenders, the model illustrates that FDI can cause markups (the net interest margins commonly used to proxy lending-to-deposit rate spreads) to increase at the same time efficiency gains and local competition keep the interest rates that banks charge borrowers from rising.  Competition from arms-length foreign loans, however, both squeezes markups and lowers interest rates.  We show that allowing foreign participation is not a welfare-improving substitute for increasing competition and technical efficiency among domestic banks"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/15/2010.

Includes bibliographical references.

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