Foreign bank presence and bank spreads: Evidence from Turkey


Koyuncu J. Y.

AUCO Czech Economic Review, vol.5, no.1, pp.64-75, 2011 (Scopus) identifier

  • Publication Type: Article / Article
  • Volume: 5 Issue: 1
  • Publication Date: 2011
  • Journal Name: AUCO Czech Economic Review
  • Journal Indexes: Scopus
  • Page Numbers: pp.64-75
  • Keywords: Emerging markets, Foreign banks, Turkey
  • Bilecik Şeyh Edebali University Affiliated: Yes

Abstract

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 affect 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.