مقررات زدایی، آزادسازی و تثبیت سیستم بانکداری مکزیک: بررسی اثرات بر رقابت
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|18314||2011||17 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of International Money and Finance, Volume 30, Issue 2, March 2011, Pages 337–353
This paper analyzes the evolution of competition in the Mexican banking system in the period 1993–2005, a period of deregulation, liberalization and consolidation of the sector. For this purpose we use two indicators of competition from the theory of industrial organization (the Lerner index and the Panzar and Rosse’s H-statistic). The empirical evidence does not permit us to reject the existence of monopolistic competition. The Lerner index shows a decrease in competitive rivalry in the deposit market and an increase in the loan market, a cross subsidization strategy being observed. The results obtained call into question the effectiveness of the measures implemented hitherto, aimed at increasing the competition of the Mexican banking system.
In recent years the Mexican banking system has undergone major changes, such as its nationalization in 1982, privatization in 1991, the financial crisis of December 1994 and its gradual opening-up to foreign investment, beginning in 1994. It was not until December 1998 that the restrictions on banking activity were completely lifted. In this context, several studies have analyzed the effect on the Mexican banking system of the events occurring during this period. Thus, in the case of privatization, Unal and Navarro (1999) show that the Mexican government was very careful to ensure due process and transparency through the entire bank privatization process. However, the lack of a legal and regulatory framework and lax oversight shadowed the success of the technical process. Haber (2005) analyzes the privatization of the banking system and argues that the government’s objective was to privatize an oligopolistic banking industry and maximize its revenue. In relation to the opening-up of the Mexican banking market to foreign capital, and with the sole exception of Haber (2005)1, the literature on emerging countries does not show any conclusive results. On the one hand, authors such as Levine, 1996 and Demirgüç-Kunt et al., 1998 and Claessens et al. (2000) offer arguments and evidence favorable to opening-up, while other authors (such as Kaminsky and Reinhart, 1999) show arguments against. The events described above can affect the degree of competition in the Mexican banking markets, and consequently the country’s economic development. In this respect, the analysis of competition in the banking sector is important, since the exercise of market power brings with it a social inefficiency that translates into a loss of social welfare (the so-called Harberger triangle), an increase in financial intermediation costs, and consequently slower growth of investment and production. Conscious of the importance of the analysis of banking competition, other studies have focused on the analysis of the effect of the events described on the evolution of competition in the specific case of the Mexican banking system. Thus, Gruben and McComb (2003) estimate an index of market power with aggregate data and identify a change in competitive behavior due to privatization. The results obtained by the authors suggest bank behavior that is consistent with competition before the privatization but with “super-competition” after privatization in which banks run at levels of output where marginal costs exceed marginal revenues. Dueñas (2003) measures competition and banking profitability in Mexico following the entry of foreign capital (Jan97–Sept02), using the Panzar and Rosse H-statistic. Their results indicate deterioration in competition in the banking system and a corresponding increase in the profitability of financial institutions as a result of the opening-up to foreign banks. Finally, Solís and Maudos (2008) estimate the social costs of market power (Harberger’s triangle) in the Mexican banking system over the period 1993–2005. It also tests the so-called “quiet life” hypothesis which postulates a negative effect of market power on bank management efficiency. Their results show that the social cost attributable to market power in 2005 is 0.15% of GDP, while that deriving from the cost (profit) inefficiency of banking management is 0.021% (0.075%) of GDP. The results allow the authors to reject the quiet life hypothesis in the deposits market, whereas market power in the setting of the interest rate on loans has a negative effect on cost efficiency. In the field of measurement of banking competition, other studies referring to emerging countries include Mexico in their samples. Thus, Gelos and Roldós (2004) find that their results are compatible with the existence of monopolistic competition in the period from 1994 to 1999, and that there was no change in the competition following the process of consolidation.2 In this context, the objective of the paper is to measure the degree of competition in the Mexican banking system in the period between 1993 and 2005, a longer period than that analyzed in previous studies and one that covers the processes of deregulation, liberalization and consolidation of the sector. For this we use two indicators taken from the so-called new empirical industrial organization: the Lerner index and the H-statistic. In relation to other studies referring to the Mexican banking system, the novelties of this study are as follows. Firstly, the Lerner index is used to measure the evolution of market power. The advantage of using it is that it permits the evolution of competition to be analyzed annually, and allows market power to be measured separately for the loans and deposits markets. Secondly, the analysis covers a period long enough to be able to observe whether the measures adopted (both privatization and opening-up to foreign investment) increased competition in the Mexican banking system. It has to be taken into account that studies carried out before now have analyzed only the consequences of privatization (Gruben and McComb, 2003) or the opening-up to foreign investment (Dueñas, 2003). And thirdly, banking competition is analyzed using two indicators (the H-statistic of Panzar and Rosse, and the Lerner index). Additionally, our paper is one of the few applications which analyzes developing countries in depth. The results obtained permit us to conclude that the measures adopted and the transformations experienced by the Mexican banking system during recent years have not in general translated into greater competitive rivalry. Specifically, the results indicate that once the sale of the commercial banks to the private sector had been completed, the intensity of competition increased. Subsequently, the exchange rate crisis had an adverse effect on inflation and on interest rates, inducing an increase in market power in loans and deposits. Finally, once the restrictions on the entry of foreign capital had been completely eliminated in 1998, and as a competitive response of the Mexican banking sector to the credit crisis in a context of high risk aversion, market power increased in deposits, while it decreased in the loans market, consolidating the following of a cross subsidization strategy. Consequently, it is possible that part of the recent growth of the profitability levels of the Mexican banking system is due to a decrease in competitive rivalry in the banking markets, which would permit us to call into question the efficacy of the measures so far implemented. Given the current international crisis that started in the summer of 2007 in the USA (the subprime crisis), we believe it is important to draw lessons from the Mexican banking sector’s past response to the crisis of the mid-nineties and its implications. To this end, we analyze the reaction of relative banking margins and the evolution of bank competition in loan and deposit markets. Although there are significant differences between the current financial turmoil and the credit crisis suffered in Mexico in the mid nineties, some interesting conclusions can be drawn from the Mexican case analyzed in the paper. Our results suggest that in response to the crisis, the configuration of the banking sector is focused on capturing deposits which are invested in the money market. The low spreads in the loan markets seems to indicate that the loan activity is reduced, possibly as banks’ risk adverse response to the tequila crisis. In this sense, given the context of the present situation of world financial markets characterized by increasing bad loans and solvency problems, the Mexican experience is useful to analyze the competitive response of banks to a credit crisis. The structure of the rest of the paper is as follows. Section 2 describes the recent evolution of the Mexican banking system. Section 3 details the instruments used to measure banking competition. Section 4 specifies the variables and sample used, and presents the empirical results. Finally, Section 5 presents the conclusions.
نتیجه گیری انگلیسی
The Mexican banking system has been subjected to major transformations as a consequence of the processes of nationalization (1982), privatization (1991), exchange rate crisis (December 1994), gradual opening-up to foreign investment (starting in 1994), and its consolidation from 2000 onwards with mergers among the principal banks. In this context of structural change, this paper analyzes the evolution of the degree of competition in the Mexican banking system from 1993 to 2005 using two instruments from the theory of industrial organization: the Panzar and Rosse H-statistic and the Lerner index of market power. Compared to other studies of the Mexican banking system, this one presents various novelties. Firstly, it uses the Lerner index to measure the evolution of market power. The advantage of using it is that it permits the evolution of competition to be analyzed with greater precision, and market power to be measured separately for the loans and deposits markets. Second, the analysis covers a long period, over which it can be observed whether the measures adopted (both privatization and the opening-up to foreign investment) have increased competition in the Mexican banking system. Previous studies have analyzed the consequences only of privatization ( Gruben and McComb, 2003) or of the opening-up to foreign investment ( Dueñas, 2003). And thirdly, banking competition is analyzed using two indicators (the H-statistic of Panzar and Rosse, and the Lerner index). The empirical evidence offered by the H-statistic does not permit us to reject the existence of monopolistic competition, a result that is consistent with those of Dueñas (2003) for the period from January 1997 to September 2002, Claessens and Laeven (2004) for the period 1994–2001 and Gelos and Roldós (2004) from 1994 to 1999. Results are robust when total revenues are considered (including therefore financial and non-financial revenues). The separate evolution of the Lerner index for each of the two banking markets analyzed shows that, from 1993 to 2005, market power decreased in the loans market while it increased in the deposits market. By sub-periods, with the crisis there occurred an increase in inflation and in interest rates, leading to greater market power both in loans and in deposits. Following the crisis, there was a decrease in credit activity, asset margins being practically nil. On the other hand, in this period the banks worked with very high liability margins. From 1997 to 2005, there was cross subsidization in the services offered by the Mexican banking system, granting loans with very small and even negative margins (with the aim of attracting or keeping clients), recuperating this loss by setting higher margins on deposits. Results show that the net effect of this cross subsidization strategy, together with the increase in activity with repos, was highly profitable for the banks, as shown by the fact that the levels of profitability (ROA) have increased substantially since 1998. The results obtained permit us to conclude that the measures adopted and the transformations experienced by the Mexican banking system during recent years have not in general translated into greater competitive rivalry. Specifically, the results indicate that once the sale of the commercial banks to the private sector had been completed, the intensity of competition increased. Subsequently, the exchange rate crisis had an adverse effect on inflation and on interest rates, inducing an increase in market power in loans and deposits. Finally, once the restrictions on the entry of foreign capital had been completely eliminated in 1998, market power increased in deposits, while it decreased in the loans market, consolidating the following of a cross subsidization strategy. Consequently, it is possible that part of the recent growth of the profitability levels of the Mexican banking system is due to a decrease in competitive rivalry in the banking markets, which would permit us to call into question the efficacy of the measures so far implemented. The results relating to the period which started in 1997 with reforms designed to improve monitoring and recapitalize the banks (new accounting standards, increase in the capital requirements, reforms in the deposit insurance, removal of restrictions on foreign bank acquisitions of Mexican banks, etc.) increased the level of banks’ risk aversion. This in turn was a disincentive to finance activities which were more profitable (but riskier). In this climate of risk aversion, banks preferred to finance safer investments with lower and even negative margins, whose unprofitability was subsidized by applying higher margins on passive operations. Therefore the results in terms of competition can be interpreted as the Mexican banking sector’s reaction to the credit crisis of the mid-nineties. One lesson derived from the results of our paper is the importance of adequately assessing banks’ reaction to the reforms implemented. The experience of the reforms adopted during the liberalization experiment (which took place in 1997) shows that banks were reluctant to extend credit to the private sector and decided to finance only the less risky borrowers with low returns (with a loan interest rate close to the money market rate). In the current economic crisis, possible measures to adopt should avoid any significant increase in the level of banks’ risk aversion, given that in this case recovery from the crisis will be much slower. However, the reforms implemented during the last ten years after the 1995 crisis to improve the legal framework, financial regulation and supervision processes have indeed shown results, although given the severity of the current crisis the Mexican banking sector faces some important challenges.