Has Foreign Bank Entry Led to Sounder Banks in Latin America?

1. How might foreign ownership enhance the soundness of banks in emerging market countries?

2. What accounts for the growth in foreign banks’ share of Latin American banking assets during the 1990s? What financial system reforms occurred during this time?

3. What important behavioral differences between foreign and domestic banks do the authors discover?

4. Does the evidence presented in this reading suggest that foreign banks have helped strengthen the banking systems in the host countries? Explain why.

Source: “Has Foreign Bank Entry Led to Sounder Banks in Latin America?” Jennifer S. Crystal, B. Gerard Dages, and Linda S. Goldberg, Federal Reserve Bank of New York Current Issues in Economics and Finance, 8(1), January 2002, pp. 1-6.