This has meant a significant increase in cross-border capital movements driven by increasing competition, the quest for higher rates of return and the establishment of business presence in regional markets. Cross-border mergers and acquisitions in the financial sector have meant that three major financial conglomerates account for over 40 per cent of total bank assets in the region.
In principle, the regional integration of the banking system should spur greater competition, result in the spreading of overhead costs and put downward pressure on bank lending rates, while reducing interest rate spreads. The latest data do not suggest that this is happening.