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Depositor Behavior and Market Discipline in Colombia
Author:
Mr. Roberto Steiner null

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Mr. Adolfo Barajas
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Series:
IMF Working Papers
Volume/Issue:
Volume 2000: Issue 214
Language:
English
Publication Date:
01 Dec 2000
DOI:
https://doi.org/10.5089/9781451874983.001
ISBN:
9781451874983
ISSN:
1018-5941
Pages:
34
Keywords:
WP; market discipline; depositor behavior; bank fundamentals; bank management; deposit growth; banking system; deposit insurance; Colombia; extent bank fundamentals; bank behavior; bank performance; Deposit rates; Moral hazard; Nonperforming loans; Bank deposits
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund