Alumni Profiles

Thanks to the initiative of two management professors and a grant from Citibank, students this year are using a case study on international banking entitled, “The New Conquistadors: Spanish Banks and the Liberalization of Latin American Financial Markets.”

The case, the first of its kind to be researched and written by Wharton faculty, will be incorporated into management courses at both the undergraduate and graduate levels.

“Our intent was to look at the huge push into Latin America made by two Spanish banks starting about 1995,” says Adrian Tschoegl, assistant professor of management. “We wanted the case to serve as a discussion point for a number of issues having to do with entry strategy, choice of markets, organization of multinational enterprises and so forth.”

Specifically, he and colleague Mauro Guillén (see faculty profile this issue), also an assistant professor of management, analyzed the efforts of Banco Santander and Banco Bilbao Vizcaya to create extensive retail banking empires in Latin America on the basis of approximately 20 acquisitions of leading domestic banks. “The arrival of the Spanish banks in Latin America represents one of the boldest and most far-reaching initiatives in multinational retail banking to date,” note the authors, who focused their study on three of the region’s key markets: Chile, Argentina and Mexico.

To write the case, Tschoegl and Guillén spent several weeks in the three countries above, and also Spain, where they interviewed top banking officials, regulators and academics. Citibank, which has had offices in Latin America since the early 1900s, is mentioned in the study but is not its focus, Tschoegl says.

The case study includes sections on the economic and political backgrounds of Chile, Argentina and Mexico as well as the structure of their banking systems and their specific relations with Spanish banks. Profiles of the individual Spanish banks are also included.

The two authors provide a teaching note offering questions for discussion by students and instructors. In addition to demon-strating an aspect of global financial deregulation, “I hope this case also helps students realize that their competitors, clients and customers will not always be American,” Tschoegl says. “Students need to break away from their orientation to the U.S. and recognize that there are whole areas of the world that don’t have that much to do with U.S. markets.”

As a sidelight to their study of Spanish banks, Tschoegl and Guillén wrote a second “mini-case” entitled, “Banking on Gambling: Three Regulators Respond to Lottery-Linked Bank Deposit Accounts,” which analyses a product recently introduced into Latin America by Spanish banks — lottery-linked deposit accounts.

In one particular Argentine subsidiary of Banco Santander, “If you open a savings account, you get a certain number of tickets in a lottery run by the bank,” says Tschoegl. “Every day there are prizes totaling $20,000 and once a month a lottery of $222,000. A customer’s chances of winning are proportional to the size of his or her deposits measured in increments of $200.

“You are automatically enrolled in this game and in return, the interest rate on your savings account is somewhat less than the rate on an account that doesn’t have this lottery feature. So you are paying for your tickets by foregoing some interest.” Lottery-linked deposit accounts, Tschoegl notes, raise a number of interesting financial, ethical, regulatory and policy issues.

The lottery system mini-case is expected to be introduced into an undergraduate business government relations course this year.