Competition Buzz:Concentration, Oligopoly and Large Profits in Colombian Banks (2000-2009)

Towards the end of XXI century, there were major banking crises in the developed world, but this situation did not affect Colombian banks, in contrast, in the decade mentioned reflected excellent results. This research based on the concepts developed and quantitative analysis shows that it is a reality that the Colombian banking is highly concentrated in a real situation of oligopoly that places these entities in a clear dominance over the rest of the economy. This allows, among other things, high profit margins at the expense of productivity of other sectors, despite the need for funding of these.

Worse still, in the case of SMEs and the lower strata the few who have access to credit obtained the highest rates, which places them at a real disadvantage, considering that they don’t’ have the technology to compete against “Bigs Companies” those who get the lowest interest rates, in many cases this leads them to bankruptcy. Interest rates are undoubtedly important in the development of the economy as growth generator tool, since in a scenario where interest rates are low, there is an incentive for firms and households decide to further their investment plans and production, while increasing their willingness to consume, which does not occur in Colombia. The high bank interest rates become an obstacle to industrial development not allowing the leverage needed to make investments.

Full Content: SSRN

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