Foreign Bank Presence and Bank Spreads: Evidence from Turkey

Using bank-level data for Turkey, this paper examines whether foreign banks are able to operate with lower spreads and whether the overall level of foreign bank participation in the banking system lowers spreads among domestic banks. Empirical analysis yields that foreign banks are able to charge lo...

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Bibliographic Details
Published inCzech Economic Review Vol. 5; no. 1; pp. 64 - 75
Main Author Yalcınkaya Koyuncu, Julide
Format Journal Article
LanguageEnglish
Published Univerzita Karlova v Praze - Institut ekonomických studií 2011
Charles University in Prague - Institute of Economic Studies
Subjects
Economy
emerging markets
Foreign banks
Turkey
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Summary:Using bank-level data for Turkey, this paper examines whether foreign banks are able to operate with lower spreads and whether the overall level of foreign bank participation in the banking system lowers spreads among domestic banks. Empirical analysis yields that foreign banks are able to charge lower spreads than domestic banks in Turkey. However, findings indicate that the overall level of foreign bank participation in the Turkish banking system does not ffect spreads of domestic banks directly. Instead, the overall level of foreign bank participation in the banking system affects the spreads indirectly through its effects on overhead expenses. Overhead expenses of all banks decrease as foreign bank participation increases.
ISSN:1802-4696