Consolidation and Market Structure in Emerging Markets Banking Systems

This paper examines the evolution of market structure in emerging markets during the 1990’s. While a significant process of bank consolidation has been taking place in these countries, reflected in a sharp decline in the number of banks, this process has not systematically been associated with increased concentration as measured by standard indices. Moreover, econometric estimates based on the Panzar-Rosse (1987) methodology suggest that, overall, markets have not become less competitive in a sample of eight European and Latin American countries. Lowering barriers to entry, such as allowing increased participation of foreign banks, appears to have prevented a decline in competitive pressures associated with consolidation. JEL Classification Numbers: G21, L13, L51