Bank Regulation in Argentina



The Argentine bank sector suffered from inefficiency and high operative costs throughout the 1990s, as well as a low confidence mainly due to uncertainty about future government policies caused by inconsistent government policies. The Argentine bank regulation underwent several changes between 1990 and 2003 to improve the performance within the market and increase the overall confidence for the Argentine bank system. The Central Bank was given a new role and made independent, capital requirements were introduced and the Supervision of the bank sector was changed.

Purpose: The purpose of this thesis is to make a comparative study of the bank regulation in 1990 and the bank regulation in 2003 in Argentina, in order to analyse how the bank regulation has affected the performance of the bank market.

Method: To reach the purpose of the report a qualitative method has been conducted, using secondary data, mainly collected in Argentina.

Results: The overall conclusion is that the bank regulation in 2003 has improved the performance within the bank sector. The efficiency of the banks has increased, although the results within the sector are still low. The service quality has increased through better communication, higher credibility and security. There is a tendency of increased market power for foreign banks and large national banks, although there are still few signs of banks having substantial market power.

Quantitative and Qualitative Method

There are two main types of methods on which a study can be based: a quantitative method or a qualitative method. A quantitative method, aims to statistically describe and clarify a chosen subject and the data is obtained through a strictly structured and standardised collection. The qualitative method, on the other hand, tries to give a profound and complete understanding of the subject studied and the collection of data is less standardised and more flexible than the one used in a quantitative study. Since the qualitative method to a greater extent uses words to explain a phenomenon instead of numbers, it gives the author more space for interpretations.

When analysing the regulation of a bank sector, analysts commonly use a quantitative method through regression analysis based on statistics of relevant variables. This study is, however, mainly based on a qualitative method to make a comparative study of the Argentine bank regulation in 1990 and in 2003. The choice of method is based on the fact that the problem of bank regulation in developing countries generally is complex and strongly affected by volatile political decisions and trustworthiness from the outside world. Some statistics are included in the study, but are only used as a compliment to the qualitative method.

Collection of Data and Choice of Theoretical Approach

The collection of data for this study is based on secondary material and has mainly been carried out in Buenos Aires, Argentina, during a six month period. To get a pre- understanding about the subject, several persons with knowledge about the phenomenon was contacted. Informal conversations were carried out to give suggestions on where to search for, e.g. previous investigations, books and articles and give simplified explanations about the subject. Reports published by investigators at leading universities in Argentina, as well as the United States and the United Kingdom have been used. Furthermore, investigations from international institutions (such as the World Bank) together with information from institutionsand organisation in Argentina (such as CEFID-AR and CESPA, see appendix, page 57) have been used as sources for the empirical findings of this report.

Since the purpose of this thesis is to analyse how bank regulation affects the performance on the bank market in Argentina by making a comparative study, I have chosen to use a modified version of the SCP model (see chapter 3, Frame of reference). The SCP model gives an overall view of the bank market and tries to explain the complex connection between several variables connected to the phenomenon. To limit the study and give a simplified explanation of the phenomenon I chose to use only a few variables within the bank market and further exclude the behaviour (conduct) of the banks. This does not imply that the variables excluded, e.g. the behaviour of banks, has no affect on the performance on the bank market, but given the purpose of the report, is not as relevant as, e.g. the structure of the bank market. The choice of variables used in this report is not obvious and taking the aim of the report into account, it would be possible to include more variables. I have based the choice of variables given my knowledge about the subject and given commonly used variables in previous investigations and do moreover, try to explain the choice of variables in chapter 3, Frame of reference. Since I mean that the behaviour of the BCRA has been of great importance for the performance within the market, I have also chosen to use the quantity theory of money to include the perspective of monetary policies.

Author: Emma Sörensson, Source: University of Linköping






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