Date of Award

January 2015

Document Type


Degree Name

Master of Business Administration (MBA)


Economics & Finance

First Advisor

Prodosh Simlai



In this paper, I investigate a decade of change between foreign and domestic banks in the Chilean banking system from 2001-2013. Using the Backward and Forward Stepwise Selection method to construct my panel regressions, I compare my findings to those of previous author(s) found in the literature. I consider the factors that determine interest rate spreads, and find that all banks have become more efficient since 2000 and that non-performing loans for both domestic and foreign banks lead to higher bank spreads. I find also, that bank concentration leads to higher spreads for domestic banks. This paper theorizes that diversification of the banking system with the establishment of niche banks can lead to the reduction of bank concentration when placed in selectively highly concentrated sectors of the economy. Further, diversification allows for increased competition in those sectors, without affecting the other sectors of the economy and the overall health of the banking system. I find that concentration among the Top-5 banks in the Chilean banking system has decreased since 2000.