Interest margins and bank regulation in Central America and the Caribbean
Anthony Birchwood,
Michael Brei and
Dorian M. Noel
Journal of Banking & Finance, 2017, vol. 85, issue C, 56-68
Abstract:
This paper examines empirically the determinants of bank interest margins in Central America and the Caribbean over the period 1998–2014. A particular focus is set on the impact of differences in the regulatory environment and market structure across countries in explaining the interest margins of individual banks. Our results suggest that bank market power, operating costs, credit risk, and liquid asset holdings increase the margin between loan and deposit rates, while increased income diversification and GDP growth are associated with lower loan-deposit spreads. When considering information on banking regulation, we find strong evidence to support our main hypothesis that improvements in market quality and liberalization have a significant effect on interest margins. More specifically, reductions in entry requirements to banking, higher involvement of foreign banks, and increased financial statement transparency are associated with significant reductions in interest margins.
Keywords: Bank margin; Bank spread; Central America; Caribbean (search for similar items in EconPapers)
JEL-codes: E43 G21 L11 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (26)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426617301875
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Interest margins and bank regulation in Central America and the Caribbean (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:85:y:2017:i:c:p:56-68
DOI: 10.1016/j.jbankfin.2017.08.003
Access Statistics for this article
Journal of Banking & Finance is currently edited by Ike Mathur
More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).