COMPETITION and EFFICIENCY in the MEXICAN BANKING INDUSTRY Theory and Empirical Evidence SARA G CASTELLANOS, GUSTAVO A DEL ÁNGEL & JESÚS G GARZA-GARCÍA Competition and Efficiency in the Mexican Banking Industry This page intentionally left blank Competition and Efficiency in the Mexican Banking Industry Theory and Empirical Evidence Sara G Castellanos, Gustavo A Del Ángel, and Jesús G Garza-García Palgrave macmillan COMPETITION AND EFFICIENCY IN THE MEXICAN BANKING INDUSTRY Copyright © Sara G Castellanos, Gustavo A Del Ángel, and Jesús G Garza-García 2016 Softcover reprint of the hardcover 1st edition 2016 978-1-137-46528-3 All rights reserved No reproduction, copy or transmission of this publication may be made without written permission No portion of this publication may be reproduced, copied or transmitted save with written permission In accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8TS Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages First published 2016 by PALGRAVE MACMILLAN The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988 Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire, RG21 6XS Palgrave Macmillan in the US is a division of Nature America, Inc., One New York Plaza, Suite 4500, New York, NY 10004-1562 Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world ISBN 978-1-349-55677-9 E-PDF ISBN: 978–1–137–51841–5 DOI: 10.1057/9781137518415 Library of Congress Cataloging-in-Publication Data Castellanos, Sara G (Sara Gabriela), 1968– Competition and efficiency in the Mexican banking industry : theory and empirical evidence / by Sara G Castellanos, Gustavo A Del Ángel and Jesús G Garza-García pages cm Includes bibliographical references and index Banks and banking—Mexico Competition I Angel, Gustavo A del II Garza-García, Jesús Gustavo III Title HG2714.C37 2015 332.10972—dc23 2015019818 A catalogue record for the book is available from the British Library To our beloved families and friends with love and gratitude SGC, GD, JGGG This page intentionally left blank CONTENTS List of Figures and Tables ix Preface and Acknowledgments xi Introduction Literature Review of Banking Studies Structural Evolution and Cycles of Consolidation 37 Competition in the Mexican Banking System: A Review 71 Analysis of Competition and Efficiency in the Mexican Banking Sector 85 Competition Policy in the Mexican Financial System 125 Conclusions 159 Notes 165 References 173 Index 189 This page intentionally left blank FIGURES AND TABLES Figures 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 5.1 5.2 5.3 5.4 5.5 5.6 5.7 6.1 6.2 Bank assets on GDP Four-firm concentration ratio 1970–1980 HHI Index 1970–1980 Four-firm concentration ratio on assets 1982–1988 Commercial banks assets on GDP 1983–1992 Four-firm concentration ratio on assets 1988–1993 Commercial banks assets on GDP 1992–2004 Four-firm concentration ratio on assets 1997–2002 HHI Index 1997–2002 Efficiency index VRS 2001–2012 Efficiency index CRS 2001–2012 Efficiency index SCALE 2001–2012 Efficiency index for system, local and foreign banks Efficiency index, foreign banks: M&A vs de novo Efficiency index, foreign banks by nationality Efficiency index, system and the seven largest banks Boone competition index for seven countries of Latin America, 2001–2011 Bank profitability, 2001–2013, average of the system 39 40 40 47 48 50 56 57 57 90 90 91 92 93 94 95 135 135 Tables 3.1 3.2 A.3.1 A.3.2 A.3.3 5.1 5.2 5.3 Process of bank privatization Mergers and 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Journal of Money, Credit and Banking 34 (1): 254–282 Villalpando-Benítez, Mario 2000 “The Political Economy of Banking Regulation: The Case of Mexico, 1940–1978.” PhD Dissertation The Ohio State University Vives, Xavier 2011 “El Paradigma de la Competencia en el Sector Bancario Después de la Crisis.” IESE Business School, Occasional Paper 196 Wezel, Torsten 2010 “Bank Efficiency amid Foreign Entry: Evidence from the Central American Region.” International Monetary Fund, Working Paper 10/95 Wheelock, D C and P W Wilson 1999 “Technical Progress, Inefficiency, and Productivity Change in US Banking, 1984–1993.” Journal of Money, Credit and Banking 31 (2): 212–234 World Bank 2010 “Secured Transactions Systems and Collateral Registries Investment Climate Advisory Services.” Washington, DC: World Bank January World Bank 2012 Global Financial Development Report 2013: Rethinking the Role of the State in Finance Washington, DC: World Bank Yu, Peiyi and Werner Neus 2005 “Market Structure, Scale Efficiency, and Risk as Determinants of German Banking Profitability.” Tubinger Diskussionsbeiträge, Working Paper 294 Zingales, Luigi and Raghuram G Rajan 2003 “Banks and Markets: The Changing Character of European Finance.” National Bureau of Economic Research, Working Paper 9595 188 REFERENCES Internet Sites Banco Bicentenario inicia proceso de liquidación 2014 Comunicado de Prensa, Comisión Nacional Bancaria y de Valores, 23 de julio,http://www.cnbv.gob mx/SECTORES-SUPERVISADOS/BANCA-MULTIPLE/Prensa%20%20 Sector%20Bancario/Comunicado%20de%20Prensa%20Conjunto%20BB.pdf Reforma Financiera 2014 Presidencia de la República, http://cdn.presidencia.gob mx/reformafinanciera/Reforma_Financiera.pdf Reforma Financiera, http://reformas.gob.mx/reforma-financiera/avances Trabajo de Investigación y Recomendaciones sobre las Condiciones de Competencia en el Sector Financiero y sus Mercados 2014 Comisión Federal de Competencia Económica, http://www.cofece.mx/index.php/prensa/historico-de-noticias/trab -inv-recom-sec-fin?tmpl=component&format=pdf Summary of Key Financial Reforms Banco de Mexico., http://www.banxico.org mx/sistema-financiero/disposiciones/summary-of-key-financial-syst.html INDEX Page numbers in italic denote figures and tables ABC Capital, 88, 90–1, 109–11 ABN Amro Bank, 55, 67 Actinver, 88, 90–1, 109–11, 168n7 Afirme, 67, 88, 90–1, 109–11, 149 Alianza, 52 Allen, Franklin, 33 Allen, Jason, 23 American Express, 55, 67, 88, 90–1, 109–11 Andreis, Ailin Marius, 26 Antitrust Authority (Comisión Federal de Competencia Económica [Cofece]), 132, 143–55, 164, 171n20 Antitrust Law (Ley Federal de Competencia Económica), 132, 144 Ariff, Mohamed, 24 Athanasoglou, Panayiotis P., 17 Autofin, 88, 90–1, 109–11 Ávalos, Marco, 75–6 Bain, Joe S., 10 BAM, 67 Banamex, 49, 51, 53, 55, 88, 90, 91, 92–3, 95, 108, 146, 148 Banca Confía, 49, 52, 55 Banca Mifel, 67, 88, 90–1, 109–11 Banca Serfín, 49, 51, 53, 55 Bancen, 49, 88 Banco Ahorro Famsa, 58, 59, 67, 88, 90–1, 109–11 Banco Amigo, 58, 67, 168n7 Banco Azteca, 58, 59, 67, 88, 90–1, 109–11, 149, 163, 166n19 Banco Bancrea, 67 Banco Base, 67, 88 Banco Bicentenario, 67, 155, 163 Banco Bilbao-Vizcaya (BBV), 51, 52 Banco Bilbao-Vizcaya Argentaria (BBVA), 51, 92 Banco Compartamos, 58, 59, 67, 88, 90–1, 109–11, 163 Banco de Comercio, 39 Banco de México (Central Bank of Mexico), 38–41, 44–6, 50–1, 52, 55, 81–3, 130–3, 136–7, 145–8 Banco del Atlántico, 49, 51, 52 Banco del Bajío, 88, 90–1, 109–11 Banco Fácil, 58, 67, 88, 90–1, 109–11, 168n7 Banco Finterra, 67 Banco Forjadores, 67 Banco Inmobiliario Mexicano, 67 Banco Internacional, 49 Banco Inverlat, 51, 53, 55–6 Banco Mexicano, 51, 52, 55 Banco Multiva, 67, 88, 90–1, 109–11, 168n7 Banco Nacional de Comercio Exterior (BANCOMEXT), 140 Banco Progreso Chihuahua, 67 Banco Regional, 67, 168n7 Banco Unión, 52 Banco Wal-Mart, 58, 59, 67, 88, 90–1, 109–11, 168n7 190 INDEX Bancomer, 49, 51, 52–3, 55, 88, 90, 91, 92, 95, 109–11, 146, 148 Bancoppel, 58, 59, 67, 88, 90–1, 109–11, 168n7 bancos multiples (multipurpose banks or multibanks), 42–3 Bancrecer, 49, 51, 52, 53 Bank Liquidity Regulation Committee, 142–3 Bank of America, 55, 67, 88, 90–1, 109–11 Bank of National Savings and Financials Services (Banco del Ahorro Nacional y Servicios Financieros [Bansefi]), 136–9, 156–7, 169–70n8 Bank of New York Mellon, 88, 90–1, 109–11, 168n7 Bank of Nova Scotia, 51, 53, 55–6 Bank of Tokyo-Mitsubishi UFJ, 55, 67, 88, 90–1, 109–11 Bank Savings Protection Law (Ley para la Protección del Ahorro Bancario), 168–9n2 Bankaool, 67 BankBoston, 55, 88 Banker, Rajiv D., 86 banking research literature bank competition and financial stability, 33–5 bank productivity, 24–6 banking competition, 27–9, 71–2 market power and efficiency, 10–18 measuring bank efficiency, 18–24 overview, 9–10 representative empirical studies, 29–32 See also competition research literature Bankruptcy Law (Ley de Concursos Mercantiles), 62–4, 141 banks by nationality, 88 Banoro, 49, 51, 52 Banorte, 49, 53, 88, 92, 95, 146, 148, 167–8n4 Banpaís, 49, 52 Banregio, 88, 90–1, 109–11 Bansí, 58, 67, 88, 90–1, 109–11 Barclays, 67, 88, 168n7 barriers to entry, 12–13, 31, 56–62, 66, 76, 81–4, 144–5, 148, 160–4, 171n19 Barth, James R., 23 Basel II, 98 Basel III, 142 Bátiz, Enrique, 76 BBVA Bancomer, 51, 88, 92, 95 See also Bancomer BCH, 49 Beck, Thorsten, 17, 33 Berger, Allen, 3, 10, 13–14, 15–16, 19–22, 33–4, 80, 91 Bhattacharyya, Arunava, 22 Bikker, Jacob, 27, 29, 30, 31 Bital, 51, 52–3, 55 BNP, 55–6 Boone, Jan, 85, 94 Boone competition index, 6, 27, 29, 32, 34, 85–6, 94–7, 99, 100–6, 108, 112–23, 134, 135, 161, 168, 169 Bos, Jaap W B., 17 Boyd, John H., 33 Bresnahan, Timothy, 5, 27–8, 30 Bresnahan–Lau model, 5, 27–8, 31–2 Brissimis, Sophocles N., 17 Buchs, Thierry, 30 Buró de Crédito, 149 BX+, 67 Cajueiro, Daniel O., 17, 32, 34 Calem, Paul S., 16 Campero, Alejandra, 134 Can, Luc, 24 capitalization, 1, 51, 79, 97, 108, 140, 162, 170n11 capitalization index of development banks, 2006–2013, 156 Carletti, Elena, 33 Carlino, Gerald A., 16 Castañeda, Gonzalo, 59–60, 77, 128, 166n19 INDEX Castellanos, Sara G., 59–60, 128, 133, 134, 169n6 Casu, Barbara, 26, 29, 100 Caves, Douglas, 24 Central Bank of Mexico (Banco de México), 38–41, 44–6, 50, 81–3, 130–3, 136–7, 145–8, 170–1 Centro, 52 Chang, Shun-Chiao, 32 Charnes, Abraham, 20, 86 Chase Manhattan, 54 Chávez-Presa, Jorge A., 43–4 Chortareas, Georgios, 18, 26, 31 Christiansen, Lauritis, 24 Cibanco, 88, 90–1, 109–11, 168n7 Čihák, Martin, 34, 94, 169n7 Círculo de Crédito, 150 Citibank, 51, 52–3, 54–5, 88 Claessens, Stijn, 30, 73 CNBV See National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores [CNBV]) Cofece (Antitrust Authority), 132, 143–55, 164, 171n20 Comerica, 55 Comermex, 49 Commercial Code (Código de Comercio), 141 competition policy financial sector market study by Mexico’s Antitrust Authority, 143–54 government and competition in the financial sector, 126–8 overview, 125–6, 154–5 pre-2014 reform, 128–40 reforms of 2014, 140–3 See also financial reforms of 2014 competition research literature competition and efficiency, 72–80 competition and stability, 80 future of, 84 overview, 71–2 policy studies, 81–3 See also Boone competition index 191 competition-fragility view, 4, 6, 10, 33–4, 80, 160 competition-stability view, 4, 6, 10, 33–4, 80, 160 concentration–profitability relationship, 10, 17 relative-market power hypothesis (RMP), 3, 10–11, 13–18, 79, 100 structure-conduct performance (SCP) hypothesis, 3, 10–18, 73, 79 Condusef (National Agency for the Protection of Users of Financial Services), 129, 131, 132, 142, 151, 164, 169n3 consolidation of banking sector, 9, 17, 27, 30, 35, 71, 79, 149, 159–61 consolidation after bank expropriation of 1928, 45–8 credit crunch to, 56–8 cycles of, 4, 37–8 drivers of consolidation, 5, 65–6 early consolidation, 38–45 multibank consolidation, 42–4 opening and globalization, 53–6 reduction of entry barriers, 58–62 regulatory change to promote credit growth, 62–5 reprivatization, 48–56 Consultoría Internacional Banco (Cibanco), 67, 90–1, 109–11 Cooper, William, 20, 86 credit reporting agencies, 149–50 Credit Suisse, 67, 88, 90–1, 109–11 Cremi, 49, 52 Cuza, Alexandru Ioan, 26 da Silva, Geraldo, 24, 31 De Nicoló, Gianni, 33 de novo banks, 2, 87, 88–9, 91, 93, 98, 107–8, 167n1 decision-making unit (DMU), 20–2, 86, 165n5 Del Ángel, Gustavo A., 44, 71 Delis, Manthos D., 17, 98, 107 Della Chang, Jui-Chuan, 32 Demirguc-Kunt, Asli, 17 192 INDEX Demsetz, Harold, 13 Deutsche Bank, 56, 67 development banks, 38, 60, 129, 163, 168n8, 170n9, 170n11, 171n29 delinquency index of credit portfolio, 2011–2013, 158 development banks, sector, and year of foundation, 136 financial indicators of development banks, 156 and reform, 136–44, 151–5 ROA of development banks and commercial banks, 2011–2013, 157 Deygun, Meryem, 32 Diewert, W Erwin, 24 DiSalvo, James, 32 Djankov, Simeon, 63 Drake, Leigh M., 23 Dresdner Bank, 55 Dueñas, Ricardo, 72, 73 Eckaus, Richard, 42 efficiency analysis data envelopment analysis (DEA), 4, 6, 18–24, 26, 31, 79–80, 85–6, 96–7, 108, 161 distribution-free approach (DFA), 19–20 free disposal hull (FDH), 19 Malmquist productivity index, 4, 9, 24–6 nonparametric methodologies, 4, 9, 19, 160 parametric methodologies, 4, 9, 19, 160 stochastic frontier approach (SFA), 4, 16–20, 22–4, 26, 77 thick frontier approach (TFA), 19–20 efficiency indexes CRS (constant returns to scale), 21, 86–97 CRS efficiency index 2001–2012, 90 CRS efficiency index, 2008–2012, 110 efficiency index, foreign banks: M&A vs de novo, 93 efficiency index for system, local and foreign banks, 92 efficiency indexes per bank, 109 fixed effects, efficiency coefficient as the dependent variable (CRS), 120–1 fixed effects, efficiency coefficient as the dependent variable (SCALE), 122–3 fixed effects, efficiency coefficient as the dependent variable (VRS), 118–19 by nationality, 89 random effects, efficiency coefficient as the dependent variable (CRS), 116–17 random effects, efficiency coefficient as the dependent variable (SCALE), 114–15 random effects, efficiency coefficient as the dependent variable (VRS), 112–13 SCALE, 21, 87, 89, 91–9 SCALE efficiency index, 2001–2012, 91 SCALE efficiency index, 2008–2012, 111 VRS, 21, 86–7, 90–9 VRS efficiency index, 2001–2012, 90 efficiency indicators: methodology, data, and results, 86–94 efficient-structure (ES) hypothesis, 3, 13–18, 73, 79 X-efficiency and scale efficiency, 3, 14–17, 22, 79 E-Global, 146, 171n26 electronic and mobile payments, 146–8, 171n22 Elektra, 59 Elizondo, Alan, 133–4 empirical literature See banking research literature entry barriers, 12–13, 31, 56–62, 66, 76, 81–4, 144–5, 148, 160–4, 171n19 Evanoff, Douglas, 14 INDEX Fang,Yiwei, 23, 24 Fare, Rolf, 24 Fazio, Dimas M., 17, 32, 34 Federal Judicial System Law (Ley Orgánica del Poder Judicial de la Federación), 141 Federal Mortgage Company (Sociedad Hipotecaria Federal [SHF]), 137, 138, 139 Fernández, Raul, 80 Ferrier, Gary D., 21 financial crisis of 2008, 1, 6, 60, 85, 92–3, 96, 107–8, 126, 134, 136, 140, 161–2, 166n18, 170n11 financial disintermediation, 47 financial reforms of 2014, 5, 6–7, 65, 83, 140–3, 151–3, 163 effect on competition and efficiency, 154–5 financieras (nonbank banks), 38–40, 43 Fiordelisi, Franco, 23 First Chicago Bank, 55 FOBAPROA (deposit insurance institution), 51, 53 Forbes, William, 16 foreign banks, 1–2, 6, 17, 23–4, 26, 54–5, 77–8, 87, 91–4, 98, 107–8, 162, 167n1–2, 167–8n4 banks by nationality, 88, 94 Fortier, Diana L., 14 Fovissste, 150 Fuji Bank, 55–6 Fundación Dondé Banco, 67 Fungacova, Zuzana, 30 Gale, Douglas M., 33 Galindo, Arturo, 92 Garza-Garcia, Jesús G., 18, 26, 31, 79–80, 86, 89, 96, 99, 107, 167n3 GDP, 39, 47, 56–7, 74, 80, 98, 107, 138 bank assets on GDP, 39 commercial bank assets on GDP 1983–1992, 48 commercial bank assets on GDP 1992–2004, 56 GE Capital, 52, 54, 67 193 GE Money, 88 generalized method of moments (GMM), 17, 34, 79 Germany, 17, 30, 31–2, 45, 87, 88, 98, 144 Girardone, Claudia, 18, 26, 29, 31, 100 Glass–Steagall Act, 38, 43 Goldberg, Laurence G., 16 Gómez, Rodrigo, 41 Griffith, Rachel, 85, 94 See also Boone competition index Grosskopf, Shawna, 24 Gruben, 72, 73 Grupo Financiero Mifel, 67 grupos financieros (financial groups or conglomerates), 42 Guerrero, Rodolfo, 78, 99 Gutiérrez de Rozas, Luis, 31 Haaf, Katharina, 29–30 Haber, Stephen H., 71, 77–8, 87, 91, 167n1 Hahn, Franz, 17 Hall, Maximilian J B., 23 Hancock, Diana, 21 Hannan, Timothy H., 15 Harrison, Rupert, 85, 94 See also Boone competition index Hartmann, Philipp, 33 Hasan, Ifterkhar, 23 Herfindahl–Hirschman index (HHI), 11–13, 34, 39, 40, 57, 76, 97, 128, 165n1 Hernández, Fausto, 59–60, 75–7, 128 Hernández-Ochoa, César, 63 Hope, Christopher J., 34 HSBC, 51, 53, 55, 67, 88, 90–1, 92–3, 95, 109–11, 146 Huang, Tai-Hsin, 32 Huidobro, Alberto, 139 Humphrey, David B., 21, 22, 91 Inbursa, 88, 90–1, 92, 95, 109–11, 148 industrial organization theory, 4, 10, 27, 29 inflation, 1, 17, 45, 74, 80, 107, 108, 162 194 INDEX Infonavit, 150, 152 ING Bank, 55, 67, 88, 90–1, 109–11 Inter Banco, 88, 90–1, 109–11 Interacciones, 67, 88, 90–1, 109–11 internationalization of banking, 5, 53–5 Invex, 67, 88, 90–1, 109–11, 146 IPAB (Instituto de Protección al Ahorro Bancario, Banking Savings Protection Institute), 154, 168–9n2 Iwata, Gyoichi, 27–8, 32 IXE, 67, 88, 90–1, 109–11 Izquierdo, Alejandro, 92 Jalal, Abu M., 33 JPMorgan, 54, 67, 88 Kaiser, Karen, 132–3, 134 Kamil, Herman, 92 Kappler, Leora F., 34 Kurtz, Robert D., 14 Kwan, Simon H., 23–4 L@ Red de la Gente (L@ Red), 138 Laeven, Luc, 30, 73 Lau, Lawrence, 5, 27 See also Bresnahan–Lau model Law for Credit Contracts and Operations (Ley General de Títulos y Operaciones de Crédito), 62, 63, 64, 141 Law for Transparent and Ordered Financial Services (Ley para la Transparencia y Ordenamiento de los Servicios Financieros), 62, 81, 130–1 main powers granted to financial authorities in 2007 reform, 131–2 Law of Credit Institutions (Ley de Instituciones de Crédito), 58, 62, 65, 136 Law of Popular Savings and Credit (Ley de Ahorro y Crédito Popular), 61, 69, 155 Law on Guaranteed Loan Transparency and Competition (Ley de Transparencia y Fomento a la Competencia en el Crédito Garantizado), 129–30, 141 Lensink, Robert, 107 Lerner index, 12, 27–32, 34, 73, 75, 80 Leuvensteijn, Michiel Van, 32 Lever, Carlos, 132–3 Levine, Ross, 17 Levy Yeyati, Eduardo, 30 liberalization, 6, 22, 30, 34, 47, 73, 127 limited liability company (sociedad anónima), 145 limited purpose banks (Sociedades Financieras de Objeto Limitado [Sofoles]), 60, 99, 128, 131, 132, 138, 170n10–11 Lin, Chen, 23 Liu, Guy, 18 Liu, Hon, 34 Liu,Ying, 23 Lloyd-Williams, D M., 16, 30 loan intensity, 1, 31, 80, 107, 108, 162 López Portillo, José, 45 Lovell, C A K., 22 Lozano-Vivas, Ana, 22, 87 Ma,Yue, 23 Madrid, Miguel de la, 48 major changes to Mexico’s banking institutional framework, 99 Malmquist productivity index, 4, 9, 24–6 Marcos Yacamán, Jesús, 71 Marichal, Carlos, 71 market power, 2–3, 27, 30, 32, 34, 71, 73–6, 127, 153, 164 market power hypotheses, 3–4, 9–18, 71, 73–6, 79, 159 See also relative-market power (RMP) hypothesis; structure-conduct performance (SCP) hypothesis Márques-Ibanez, David, 23 Márquez, Javier, 41 INDEX Martinez Peria, María Soledad, 17 Márton, Katherin, 23 Mathisen, Johan, 30 Maudos, Joaquín, 16, 30, 73–5 Maurer, Noel, 71 McComb, Robert, 72, 73 Meesters, Aljar, 107 Mercantil del Norte, 88 mergers and acquisitions (M&A), 85, 87, 91, 93, 100, 107, 159, 167n1 Mexican Stock Market (Bolsa Mexicana de Valores [BMV]), 59 Micco, Alejandro, 30 Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público [SHCP]), 129, 132, 143 Mirzaei, Ali, 18 Mody, Ashoka, 17 Mohan, Ram, 26 Molyneux, Philip, 16, 23, 26, 30, 34, 98 Monex, 67, 88, 90–1, 109–11 Moore, Tomoe, 18 Móré, C., 17 Multibanco MM, 49 multibanks (banca múltiple), 41–3 multipurpose financial societies (Sofomes), 61, 99, 131–2, 132, 142, 149, 152 Musacchio, Aldo, 77–8, 87, 91, 167n1 Naaborg, Ilko, 107 Nacional Financiera (NAFIN), 140 Nagore, Amparo, 30 Nagy, M., 17 Nakane, M., 31 Nathan, Alli, 30 National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores [CNBV]), 61, 64, 86, 96–7, 131, 132, 143, 146, 148, 155, 164, 169n7 nationalization of banking industry, 5, 45–7 Nations Bank, 55–6 Neave, Edwin H., 30 195 Negrín, José, 72, 75, 76, 78, 133, 134 Neus, Werner, 17 niche banks, 60, 83, 128, 167n2 nonparametric efficiency methodologies, 4, 9, 19, 160 data envelopment analysis (DEA), 4, 6, 18–24, 26, 31, 79–80, 85–6, 96–7, 108, 161 free disposal hull (FDH), 19 Malmquist productivity index, 4, 9, 24–6 nonstructural methodologies, 4, 27, 29, 31, 160 examples of, 27, 34 Norris, Mary, 24 North American Free Trade Agreement (NAFTA), 5, 53–5 Ntuli, Miracle, 34 Obrero, 52 Ocampo, Diadelfa, 72, 76 O’Dogherty, Pascual, 72, 75 Oriente, 49, 52 Ortíz Mena, Antonio, 41 Panzar, John C., 5, 27–8 Panzar-Rosse model (H-statistic), 28–32, 34, 72–3, 75–6 parametric efficiency methodologies, 4, 9, 19, 160 distribution-free approach (DFA), 19–20 stochastic frontier approach (SFA), 4, 16–20, 22–4, 26, 77 thick frontier approach (TFA), 19–20 Pasiouras, Fotios, 98, 107 payment system, 85, 98, 108, 132, 144, 145–9, 162, 168 Peltzman, S., 13 Persitiani, Stavros, 22 Ponce, Alejandro, 133 Popular Banks (Sociedades Financieras Populares [Sofipos]), 61, 128, 142, 144, 155, 171n20 authorization to, 68 196 INDEX Popular Savings and Credit Law (Ley de Ahorro y Crédito Popular), 61, 69–70, 155 Probursa, 51, 52 Promex, 49, 51, 52 Prosa, 146, 171n26 Prudential Bank, 67 Pruteanu-Podpiera, Anca, 31 Punt, L W., 16 Rai, Anoop, 16 Rai, Kulwant, 87, 92 Ray, Subhash, 26 Razo, Armando, 71 reforms, 38–9, 42–3, 47–8, 58, 62–5 financial reform of 2014, 5, 6–7, 65, 83, 140–3, 154–5, 163 relative-market power (RMP) hypothesis, 3, 10–11, 13–18, 79, 100 reprivatization of, 48–53 Republic National Bank of New York, 55 Rhoades, Stephen A., 3, 10, 14 Rhodes, E., 20 Rodríguez-Montemayor, Eduardo, 11, 73 Rojas, Mariano, 72 Rojas-Suárez, Liliana, 87, 92 Rosse, James N., 5, 27–8, 72–6, 142 See also Panzar-Rosse model (H-statistic) Royal Bank of Scotland, 90–1, 109–11 Rural Financing Fund (Financiera Rural, [Finrural]), 137 Sahay, Pankaj, 22 Salinas, Carlos, 48 Santander, 51, 52–3, 54–5, 88, 92, 95, 146 Sathye, Milind, 26 savings and credit cooperatives, 61, 69–70, 155 See also Socaps, sociedades cooperativas de ahorro y préstamo (cooperatives) scale economies, 23, 43–4, 46, 62, 83, 100, 138, 163 Schaeck, Klaus, 34, 94, 169n7 Schobert, Franziska, 31 scope economies, 43, 83, 138 Scotiabank, 88, 92–3, 95, 146 Seade, Jesús, 23 Seira, Enrique, 132–4 Shaban, Mohamed, 32 Shaffer, Sherrill, 32 Shepherd, William G., 14 Simper, Richard, 23 small and medium enterprises (SME), 82–3, 139 Smirlock, Michael, 14 Socaps, sociedades cooperativas de ahorro y préstamo (cooperatives), 142, 144–5 See also savings and credit cooperatives Societé Genérale, 55–6 Sofipos (Popular Banks), 61, 128, 142, 144, 155, 171n20 authorization to, 68 Sofoles (limited purpose banks), 60, 99, 128, 131, 132, 138, 170n10–11 Sofomes (multipurpose financial societies), 61, 99, 131–2, 132, 142, 149, 152 Solanko, Laura, 30 Solís, Liliana, 71, 73–5, 133 Somex, 49 Song, Frank M., 23 Spain, 16, 22, 30–2, 51, 87, 88–9, 91–2, 94, 98, 107–8, 143, 144, 162 Spierdijk, Laura, 32 Staub, Robert B., 24 Struck, Pedro, 72, 76 structural competition methodologies, 4, 9–10 structure-conduct performance (SCP) hypothesis, 3, 10–18, 73, 79 supercompetition, 6, 72–3 Sureste, 52 Suspension of Payments Law (Ley de Quiebras y Suspensión de Pagos), 62–4 INDEX Tabak, Benjamin M., 17, 24, 32, 34 Tendai, Gwatidzo, 34 Tequila crisis of 1995, 5, 6, 37, 63, 128, 129, 136 Thanassoulis, Emmanuel, 19, 20–1 Thornton, John, 30 Tobit panel regression, 6, 85, 96, 99, 101–6, 108, 161 Tornqvist index, 26 Trusts Related to Agriculture (Fideicomisos Instituidos en Relación la Agricultura [FIRA]), 137, 170n9 Turk-Ariss, Rima, 33, 34 UBS, 67, 88, 90–1, 109–11, 168n7 Valdmanis,Vivian, 21 Van Rixtel, Adrian, 27 Van Rooij, Maarten, 16 Ve Por Más, 58, 88, 90–1, 109–11 197 Villagómez, Alejandro, 76–7 Villalpando-Benítez, Mario, 39, 41, 44, 78 VolksWagen Bank, 67, 88, 90–1, 109–11, 168n7 Weill, Laurent, 30, 31 Weyman-Jones, Tom, 32 Wezel, Torsten, 24 Wilson, John O S., 34 World Bank, 126, 134, 161, 167, 168, 169n7 Doing Business Report (DBR), 63, 64–5, 87, 151 Financial Development Report, 127 Subnational Doing Business Report, 151 Yu, Peiyi, 17 Zhang, Zhongyang, 24 .. .Competition and Efficiency in the Mexican Banking Industry This page intentionally left blank Competition and Efficiency in the Mexican Banking Industry Theory and Empirical Evidence. .. on the analysis of competition and efficiency in the banking industry generally and in Mexico’s banking in particular were natural extensions of the seminal article Also, because of the ebb and. .. margins and prices must be taken into account when analyzing the competition conditions in the banking system We seek to contribute to the understanding of competition policy in the banking system