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Competition in the Chilean Banking Sector: A Cross-Country Comparison

Author

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  • Meral Karasulu

Abstract

Conventional wisdom tends to associate market concentration with lack of competition, although no conclusive empirical evidence exists linking the two. The concentrated structure of the Chilean banking market has thus raised concerns of insufficient competition in the sector. Media reports in the past often complained that bank lending rates were sluggish in adjust- ing to changes in interest rates, especially following decreases in monetary policy interest rates; the reports linked this finding to insufficient competition in the banking system. The Chilean banking market is indeed relatively con- centrated, and the majority of the banks are owned by a handful of financial conglomerates with significant linkages between the banking, securities, mutual and pension fund management, and insurance businesses. The own- ership linkages are mitigated, however, by firewalls and cross-selling restric- tions across the customer base, which reduce the possibility of realizing economies of scale at the financial conglomerate level.

Suggested Citation

  • Meral Karasulu, 2007. "Competition in the Chilean Banking Sector: A Cross-Country Comparison," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 1-39, January.
  • Handle: RePEc:col:000425:014201
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    Citations

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    Cited by:

    1. Piedrabuena, Bernardita, 2013. "Competencia en el mercado bancario del crédito en Chile," IDB Publications (Working Papers) 4630, Inter-American Development Bank.
    2. Ramaele Moshoeshoe & Katleho Thokoa, 2021. "Market structure and bank conduct in Lesotho," South African Journal of Economics, Economic Society of South Africa, vol. 89(3), pages 368-390, September.
    3. Juan Pablo Montero & Jorge Tarziján, 2010. "El éxito de las casas comerciales en Chile: ¿Regulación o buena gestión?," Working Papers Central Bank of Chile 565, Central Bank of Chile.

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