Factors Explaining the Interest Margin in the Banking Sectors of the European Union

Joaquin Maudos () and Juan Fernandez de Guevara
Authors registered in the RePEc Author Service: Juan Fernández-de-Guevara ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study analyses the interest margin in the principal European banking sectors (Germany, France, the United Kingdom, Italy and Spain) in the period 1993-2000 using a panel of 15,888 observations, identifying the fundamental elements affecting this margin. Our starting point is the methodology developed in the original study by Ho and Saunders (1981) and later extensions, but widened to take banks’ operating costs explicitly into account. Also, unlike the usual practice in the literature, a direct measure of the degree of competition (Lerner index) in the different markets is used. The results show that the fall of margins in the European banking system is compatible with a relaxation of the competitive conditions (increase in market power and concentration), as this effect has been counteracted by a reduction of interest rate risk, credit risk, and operating costs.

Keywords: margins; competition (search for similar items in EconPapers)
JEL-codes: G21 L11 (search for similar items in EconPapers)
Date: 2003-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Factors explaining the interest margin in the banking sectors of the European Union (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:15252

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