Measuring heterogeneity in banks' interest rate setting in Russia

Anna Burova, Alexey Ponomarenko, Svetlana Popova, Andrey Sinyakov and Yulia Ushakova ()
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Yulia Ushakova: Bank of Russia, Russian Federation

No wps77, Bank of Russia Working Paper Series from Bank of Russia

Abstract: We use credit registry data on all corporate loans issued by all Russian banks since 2017 to decompose the bank interest spreads into a common factor, as well as borrower and lender-related components while controlling for loan characteristics. We find that variation in loan rates associated with lender-specific factors (heterogeneity of banks) and borrower-specific factors (heterogeneity of borrowers) is substantial. We use the identified bank-specific components to measure fragmentation of the corporate credit market in Russia. We illustrate the developments in the Russian credit market during the pandemic using the obtained estimates. The results indicate that heterogeneity in banks' interest rate setting is high and increased in the early stage of the pandemic. The range of borrower-related premiums charged by banks also widened (mostly due to increase in rates of loans to companies in sectors presumably affected by the pandemic). Finally, our results suggest that banks tightened non-interest loan conditions during the pandemic.

Keywords: bank interest margin; bank interest spread; corporate credit; credit registry; financial stability; credit market fragmentation; Russian banking sector in the pandemic. (search for similar items in EconPapers)
JEL-codes: E44 E51 E52 E58 G21 G28 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2021-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cis, nep-isf, nep-mac and nep-tra
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Journal Article: Measuring Heterogeneity in Banks’ Interest Rate Setting in Russia (2022)
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