Publication: El Salvador Financial Sector Assessment Program Development Module: Efficiency and Competition
Date
2016-11
ISSN
Published
2016-11
Author(s)
World Bank
Abstract
This technical note was prepared in the
context of a World Bank Financial Sector Assessment Program
mission in the Republic of El Salvador in March 2016. The
Salvadoran financial system lags behind its peers in terms
of depth put it outperforms them in terms of competition and
efficiency. Given the country’s relative low financial depth
but competitive environment, there is room for expansion and
financial development which can provide greater funding for
the productive activities of the private sector. This
technical note takes four main approaches to examine the
extent of competition and efficiency of the Salvadoran
banking sector. First, it examines bank entry and exit
regulations and bank transparency to determine whether the
existing framework promotes contestability and competition.
Second, the note evaluates the degree of concentration in
the banking sector and estimates direct measures of
competition by calculating the H-statistic for the
Salvadoran banking sector and by comparing it to those
obtained for its regional peers. Third, the note evaluates
efficiency by examining the behavior of bank spreads,
profitability and financial intermediation margins and
costs. Fourth, the note looks into the different segments of
the loan market to evaluate how efficiently credit is being
allocated. Finally the note ends with some policy
recommendations. The document contains technical analysis
and detailed information underpinning the FSAP assessment’s
findings and recommendations. Further information on the
FSAP program can be found at www.worldbank.org/fsap.
Citation
“World Bank. 2016. El Salvador Financial Sector Assessment Program Development Module; El Salvador Financial Sector Assessment Program Development Module : Efficiency and Competition. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/26277?show=full&locale-attribute=fr License: CC BY 3.0 IGO.”