Title: Does foreign ownership contribute to sounder banks in emerging markets?
Description: "Foreign bank entrants into emerging markets are usually thought to improve the condition and performance of acquired institutions, and more generally to enhance local financial stability.  We use bank-specific data for a range of Latin American countries since the mid-1990s to address elements of this claim.  Across the seven largest countries, we find that the financial strength ratings of local banks acquired by foreign entities generally show a slight improvement relative to their domestic counterparts.  Our more in-depth case studies of Chile, Colombia, and Argentina do not indicate striking differences in health between larger foreign and domestic retail-oriented banks (although state banks are noticeably weaker).  However, foreign banks often have higher average loan growth, higher average provisioning expense, and greater loss-absorption capacity.  These results suggest that foreign ownership may provide important positive influences on the stability and development of emerging market banking systems"--Federal Reserve Bank of New York web site.
Subjects: Foreign Banks and banking
Places: Latin America