Bank Concentration and the Structure of Interest

Edita Tan

No 198915, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: The Philippine financial system has failed to develop over the last three decades. M3/GNP ratio has not risen but has merely fluctuated around 22-25 percent. Wrong policies are blamed for the poor performance of the system. The current interest rate structure shows extremely wide differentials between saving and time deposit rates and between saving deposit and loan rates. The paper tries to explain these by the policies adopted by the Central Bank, especially those restricting bank entry and imposing high intermediation taxes. The paper analyzes how the policies effectively repress intermediation activities and result in high profits and intermediation cost. The effects of the current policies are compared to the effects of the more traditional forms of repression followed earlier, i.e., 1960 to 1980.

Date: 1989-12
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Citations: View citations in EconPapers (6)

Published as UPSE Discussion Paper No. 1989-15, December 1989

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