Efficiency of the Brazilian banking industry during the period of 2006-2013: domestic banks x foreign banks

Abstract: After the implementation of the Real Plan in 1994, the Brazilian banking industry has undergone profound structural changes, in which the production efficiency and the presence of foreign banks in the national economy have become more important for the sector. The debate on the presence of foreign banks in domestic economies and its consequences in the banking industry efficiency is subject of much discussion. This paper aims to test if foreign banks in the Brazilian market were more efficient than domestic banks between 2006 and 2013, using Data Envelopment Analysis (DEA). After having calculated the operational efficiency measures and obtained the efficient frontiers, the results pointed to a Brazilian banking industry dominated by domestic banks, and, in the period of 2006-2013, these were more efficient than their foreign competitors, while the overall efficiency of the Brazilian banking industry, on average, has deteriorated.