Depositor Behavior and Market Discipline in Colombia

December 1, 2000

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Format: Chicago

Roberto Steiner, and Adolfo Barajas. Depositor Behavior and Market Discipline in Colombia, (USA: International Monetary Fund, 2000) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This study examines how depositors choose among different banks and over time in Colombia, focusing on whether they discipline bank behavior. By controlling for a more comprehensive set of risk/return factors, the study improves upon conventional market discipline tests. Panel data estimations for 1985-99 show that depositors prefer banks with stronger fundamentals, and that banks tend to improve their fundamentals after being “punished” by depositors. Banks with stronger fundamentals benefit from lower interest costs and higher lending rates. Market (or “regulatory”) discipline therefore appears to exist in Colombia, perhaps thanks to certain key design features of the deposit insurance scheme.

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

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/214
Stock No:

WPIEA2142000
ISBN:

9781451874983
ISSN:

1018-5941

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