The banking industry worldwide is undergoing transformation.
The global forces for change include technological innovation; the deregulation of financial services at the national level and opening-up to international competition; changes in corporate behaviour, such as growing disinter mediation and increased emphasis on shareholder value.
In addition, recent banking crises in Asia and Latin America have accentuated these pressures.
The banking industries in central Europe and Latin America have also been transformed as a result of privatisations of state-owned banks that had dominated their banking systems in the past.
Against this background, this report first reviews the main forces for change in the emerging economies' banking industry (Section I), and then analyses how these forces are affecting the structure of their banking systems through privatisations (Section II), domestic mergers (Section III) and entry of foreign banks (Section IV).
As discussed in individual sections, these structural changes raise a number of microeconomic questions about economies of scale and scope, competition within the banking market, and the business focus of domestic and foreign banks.
In addition, bank consolidation raises some important macro-prudential issues - in particular, about the impact of consolidation on supervisory structures and systemic stability in an industry dominated by a small number of institutions (Section V).