Depositor Behavior and Market Discipline in Colombia

IMF Working Papers, December 1, 2000

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Depositor Behavior and Market Discipline in Colombia

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Bibliographic details

• Authors: Roberto Steiner, Adolfo Barajas
• Published: December 1, 2000
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451874983.001

Overview

• Title: Depositor Behavior and Market Discipline in Colombia
• Authors: Roberto Steiner, Adolfo Barajas
• Date: December 1, 2000
• Objective: Examines how depositors choose among different banks and over time in Colombia, focusing on whether they discipline bank behavior.
• Scope: Panel data estimations for 1985-99.

Methodology

• Analytical improvement: Controls for a more comprehensive set of risk/return factors to improve upon conventional market discipline tests.
• Data: Panel data covering 1985-99.

Key Findings

• Depositor preferences:
  • Depositors prefer banks with stronger fundamentals.
• Bank responses:
  • Banks tend to improve their fundamentals after being “punished” by depositors.
• Pricing effects:
  • Banks with stronger fundamentals benefit from lower interest costs and higher lending rates.
• Conclusion:
  • Market (or “regulatory”) discipline appears to exist in Colombia, perhaps thanks to certain key design features of the deposit insurance scheme.

Policy Implications and Interpretation

• Market discipline presence:
  • Evidence suggests depositors can exert discipline on banks in Colombia.
• Role of deposit insurance:
  • The design features of the deposit insurance scheme may have supported the existence of market (or “regulatory”) discipline.

Subject Areas and Keywords

• Subject: Bank deposits, Banking, Deposit insurance, Deposit rates, Financial crises, Financial institutions, Financial sector policy and analysis, Financial services, Moral hazard, Nonperforming loans
• Keywords: bank behavior, Bank deposits, bank fundamentals, bank management, bank performance, banking system, Colombia, deposit growth, deposit insurance, Deposit rates, depositor behavior, extent bank fundamentals, market discipline, Moral hazard, Nonperforming loans, WP

Content in this bundle

• Depositor Behavior and Market Discipline in Colombia - WP/00/214
  • Depositor Behavior and Market Discipline in Colombia - WP/00/214 (Markdown version)
  • Depositor Behavior and Market Discipline in Colombia - WP/00/214 (PDF)