Market discipline in the Central American banking system

The hypothesis of market discipline is empirically verified in the Central American banking system. A contrast is carried out on whether the riskier banks (the ones with the worst banking fundamentals) pay higher interest rates and receive smaller amounts in deposits. The generalized method of moments is used for dynamic panel data models (the SYS GMM estimator), as well as a sample of 30 banks from six Central American countries during the 2008–2012 period. Unlike the majority of the previous empirical literature, specifically for developed countries, no evidence of market discipline was found in Central America. The results are robust for several indicators of the banking fundamentals for purposes of internal demand of bank capital, and for other econometric models. These findings indicate weaknesses in the bank policy regarding the disclosure of information.     

Disciplina de mercado en el sistema bancario centroamericano

This article empirically tests the market discipline hypothesis in the Central American banking system. Whether the riskier banks (with the worst bank fundamentals) pay higher interest rates and attract fewer amounts of deposits. We use dynamic panel data models and the generalized method of moments (SYS GMM) estimator, and a sample of 30 banks from six Central American countries over the years 2008-2012. In contrast to most of the previous empirical literature, particularly in developed countries, in Central America we did not find evidence for market discipline. The results are robust to different indicators of the bank fundamentals, to the effect of the internal demand for funding by banks, and to other econometric methods. These findings indicate weakness in the disclosure policy of banking information.     

Financial and economic performance of major Brazilian credit cooperatives

The credit union's main functions are the provision of individual financial loans based on collective savings, reaching up to provide full banking services, with expansion of its social function. Cooperatives are an alternative to supply a credit demand in the market, because a third of the municipalities have no bank branches. Although the participation of cooperatives in credit operations is still small compared to the Brazilian national banking system, its continued growth demonstrates the importance of this sector. In this sense, the analysis of the performance of these cooperatives becomes relevant to the extent that incentives to industry expansion differ from other financial institutions. In this context, this study aimed to analyze which the financial and economic performance of Brazil's largest credit unions. This performance analysis was performed using the indicators proposed by the CAMEL model, then the data envelopment analysis (DEA). It can be seen that there is a positive relationship between the use of variables in the model and the measurement of financial performance of credit unions. Moreover, according to the results, it can be observed that Uniprime Northern Paraná, Sicoob Cocred and Sicredi North RS/SC were cooperatives that stood out as efficient.     

Credit risk management at retail in Mexico: An econometric improvement in the selection of variables and changes in their characteristics

The early prediction of bad debtors for revolving credits in Mexico is a relevant issue today. The credit behavior econometric model proposed considers the changes in the characteristics of the consolidated accredited and provides better results than those obtained with the methodology utilized by the CNBV on provision matters. The results obtained show that the possibility of replacing the current model, minimizing the expected loss and increasing the ROA per financial institution at a national level by 2.20%, complies with the methodological criteria and the statistical tests in accordance with the Compiled Banking Regulation and Basel II guidelines on credit risk issues.     

Administración del riesgo crediticio al menudeo en México: una mejora econométrica en la selección de variables y cambios en sus características

The early prediction of bad debtors in revolving loans in Mexico is a relevant current issue. The proposed econometric model of behavioral scoring considers the changes in the characteristics of consolidated clients and produces better results than those obtained with methodology used by the CNBV on provisions. The obtained results show the possibility of replacing the current model, minimizing the expected loss and increasing the ROA of Mexican financial institutions in 2.20% complying the methodology and statistical testing criteria according to the Unique Banking Dispositions and the guidelines of Basel II on credit risk.