 Interest Spreads in Banking: Costs, Financial Taxation, Market Power, and Loan Quality in the Colombian Case 1974–96Adolfo Barajas, Natalia Salazar and Roberto Steiner No 1998/110, IMF Working Papers from International Monetary Fund Abstract: This paper examines the determinants of the high intermediation spread observed in the Colombian banking sector for over two decades. A reduced-form equation is estimated on the basis of a bank profit maximization model that permits a decomposition into operational costs, financial taxation, market power, and loan quality. Although the average spread did not change between the pre liberalization (1974-88) and post liberalization (1991-96) periods, its composition did, with market power being significantly reduced and the responsiveness to loan quality increased. Colombia’s progress in reducing operational costs and financial taxation and improving loan quality, will determine whether it can narrow the spread. Keywords: WP; banking system; market power; Colombia; interest rates; loan quality; intermediation spread; liberalization period; performing loan; la Republica; Nonperforming loans; Commercial banks; Loans; Deposit rates; State-owned banks (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1998/110 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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