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What Drives the Distributional Dynamics of Client Interest Rates on Consumer Loans in the Czech Republic? A Bank-level Analysis

Václav Brož () and Michal Hlaváček ()

Working Papers from Czech National Bank, Research Department

Abstract: We study the bank-level distributional dynamics and factors of client interest rates on consumer loans in the Czech Republic. We take into account that client interest rates can have different fixation periods, focus on the consumer loans category, which exhibits multimodal client interest rate distributions, and employ an alternative measure to the mean interest rate - the mode measure. We show that in recent years, most banks in the Czech Republic have started to provide new consumer loans at unprecedentedly low client interest rates. The bank-level analysis then reveals that reduced market concentration (increased market competition) and to some extent also accommodative monetary policy and changes in the market for housing loans and mortgages have been driving this development. Our results are in line with the international literature but are novel in the Czech context.

Keywords: Banks; client interest rates; competition; consumer loans (search for similar items in EconPapers)
JEL-codes: C23 C46 E43 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-tra
Date: 2018-06
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