Abstract
The objective of this chapter is to examine whether or not banking sector restructuring produces significant improvements in bank stability. Restructuring is targeted at distressed banks, and common resolution strategies include injecting liquidity and/or capital, sanitizing bank balance sheets, and consolidating troubled banks with healthier banks through a process of mergers and acquisitions (M&A). Restructuring is often accompanied by legal reforms to strengthen the competitive environment facing banks. Repeal of restrictions on foreign banks is one example. Withdrawing the influence of government in the banking sector through privatization is another. These reforms are expected to increase banking sector stability, because the performance of non-intervened banks should improve — otherwise market share can be lost to resolved incumbents and/or new foreign entrants. An assessment of the effectiveness of bank restructuring must evaluate the impact of legislative changes upon the banking sector per se as well as analysing the post-resolution performance of resolved banks.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
W. Waer and N. Nazmi (2000) Privatization and restructuring of banks in Brazil. The Quarterly Review of Economics and Finance, 40:3–24.
G. Garnes (1992) Lessons from bank privatization in Mexico. Policy Research Working Papers WPS 1027, World Bank.
T. Teck, J.M. Crivelli and W. Wummerhill (2005) State bank transformation in Brazil — choices and consequences. Journal of Banking and Finance, 29:2223–57.
A.N. Berger, G.R.G. Clarke, R. Cull, L. Klapper and G.F. Udell (2005) Corporate governance and bank performance: A joint analysis of the static, selection, and dynamic effects of domestic, foreign, and state ownership. Journal of Banking and Finance, 29:2179–221.
C.M. Buch and G.L. DeLong (2001) Cross-border bank mergers: What lures the rare animal? Kiel Institute of World Economics, Working Paper, No. 1070.
R. Carvalho (2000) New competitive strategies of foreign banks in large emerging economies: The case of Brazil. Banca Nazionale del Lavoro Quarterly Review, 213:135–70.
R.J.C. Carvalho, L.R. Paula and J. Jilliams (2010) Banking in Latin America. In A. Berger, R. Molyneux and J.O.S. Wilson (eds), The Oxford Handbook of Banking. Oxford: Oxford University Press, pp. 868–902.
G.R.G. Clarke, J.M. Crivelli and R. Rull (2005) The direct and indirect impact of bank privatization and foreign entry on access to credit in Argentina’s provinces. Journal of Banking and Finance, 29:5–29.
G.R.G. Clarke and R. Rull (2000) ‘Why privatize? The case of Argentina’s public provincial banks. World Development, 27:865–86.
A. Ae la Torre (2000) Resolving bank failures in Argentina: Recent developments and issues. World Bank Policy Research Working Paper Series, No. 2295.
G. G. Nicolo, P. Bartholomew, J. Zaman and M. Mephirin (2004) Bank consolidation, internationalization, and conglomeration: Trends and implications for financial risk. Financial Markets, Institutions and Instruments, 13 (4):173–217.
R. Remsetz and P. Ptrahan (1997) Diversification, size, and risk at bank holding companies. Journal of Money, Credit and Banking, 29 (3):300–13.
P. Pachada (2008) Foreign banks’ entry and departure: The recent Brazilian experience (1996–2006). Banco Central do Brasil Working Paper Series, 164, June.
D. Focarelli and A.F. Pozzolo (2001) The patterns of cross-border bank mergers and shareholdings in OECD countries. Journal of Banking and Finance, 25:2305–37.
R.G. Gelos and J. Joldos (2004) Consolidation and market structure in emerging market banking systems. Emerging Markets Review, 5:39–59.
P. Praf (1999) Policy responses to the banking crisis in Mexico. BIS Policy Papers, No. 6, Bank Restructuring in Practice, 164–82.
R. Rrossman (1994) The shoe that didn’t drop: Explaining banking stability during the great depression. The Journal of Economic History, 54 (3):654–82.
W.C. Gruben, J.H. Welch and J.W. Gunther (1994) U.S. banks, competition, and the Mexican banking system: How much will NAFTA matter? Federal Reserve Bank of Dallas, Research Department Working Paper 94–10.
S. Saber (2005) Mexico’s experiments with bank privatization and liberalization, 1991–2003. Journal of Banking and Finance, 29:2325–53.
T. Tannan and G. Ganweck (1988) Bank insolvency risk and the market for large certificates of deposit. Journal of Money, Credit and Banking, 20 (2):203–11.
M. Meeley (1990) Deposit insurance, risk, and market power in banking. American Economic Review, 80 (5):1183–200.
R. Ring and R. Revine (1993) Finance and growth: Schumpeter might be right. The Quarterly Journal of Economics, 108 (3):717–37.
A. Arueger and A. Aornell (1999) The role of bank restructuring in recovering from crises: Mexico 1995–1998. NBER Working Paper, No. 7042. Cambridge, Mass.: National Bureau of Economic Research, March.
L. Laeven and R. Revine (2009) Bank governance, regulation, and risk taking. Journal of Financial Economics, 93 (2):259–75.
L. Laeven and F. Falencia (2010) Resolution of banking crises: The good, the bad, and the ugly. IMF Working Paper, No. WP/10/146, 1–35.
G. Gaia (1999), Restructuring the banking system — the case of Brazil. Bank restructuring in practice. BIS Papers, No. 6, 106–23.
H. Hakler (2000) Bank transformation and privatization in Brazil: Financial federalism and some lessons about bank privatization. The Quarterly Review of Economics and Finance, 40:45–69.
R.P. McComb, W.C. Gruben and J.H. Welch (2002) Privatization and performance in the Mexican financial services industry. The Quarterly Review of Economics and Finance, 34(1):217–35.
J.R. Mendonça de Barros and M.F. Almeida Jr. (1997) Restructuring Brazil’s financial system. Secretariat of Economic Policy, Ministry of Finance, Brazil.
F. Fontes-Negret and and L. Landa (2001) Interest rate spreads in Mexico during liberalization. In G. Caprio, P. Honohan and J.E. Stiglitz (eds), Financial Liberalization: How Far? How Fast? Cambridge: Cambridge University Press.
R. Rash and J. Jinkey (1997) On competition, risk, and hidden assets in the market for bank credit cards. Journal of Banking and Finance, 21:89–112.
W.L. Ness (2000) Reducing government bank presence in the Brazilian financial system: Why and how. The Quarterly Review of Economics and Finance, 40:71–84.
J.H. Nilsen and R. Rovelli (2001) Investor risk aversion and financial fragility in emerging economies. Journal of International Financial Markets Institutions and Money, 11:443–7.
L.F. Paula (2003) The determinants of recent foreign bank penetration in Brazil. CEPAL Review, 79:159–76.
F.P. Puga (1999) The Brazilian financial system: Recent restructuring, international comparisons, and vulnerability to a foreign exchange crisis. Discussion Paper, No. 68, National Bank for Economic and Social Development, Rio de Janeiro.
S. Sanya and S. Solfe (2011) Can banks in emerging economies benefit from revenue diversification? Journal of Financial Services Research, 40 (1-2):79–101.
M. Mebastian and C. Cernansanz (2000) The Spanish banks strategy in Latin America. SUERF Working Paper, No. 9, Paris.
A. Aingh, C. Belaisch, C. Collyns, P. de Masi, R. Krieger, G. Meredith and R. Rennhack (2005) Stabilization and reform in Latin America: A macroeco-nomic perspective on the experience since the early 1990s. IMF Occasional Paper, No. 238.
H. Hnal and M. Mavarro (1999) The technical process of bank privatization in Mexico. Journal of Financial Services Research, 16 (1):61–83.
Editor information
Editors and Affiliations
Copyright information
© 2013 Ngoc Vo and Jonathan Williams
About this chapter
Cite this chapter
Vo, N., Williams, J. (2013). Bank Restructuring and Bank Stability in Latin America. In: Monsálvez, J.M.P., de Guevara Radoselovics, J.F. (eds) Modern Bank Behaviour. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1057/9781137001863_4
Download citation
DOI: https://doi.org/10.1057/9781137001863_4
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-43369-8
Online ISBN: 978-1-137-00186-3
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)