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The impact of bank regulations, concentration, and institutions on bank margins

Asli Demirguc-Kunt, Luc Laeven () and Ross Levine ()

No 3030, Policy Research Working Paper Series from The World Bank

Abstract: This paper examines the impact of bank regulations, concentration, inflation, and national institutions on bank net interest margins using data from over 1,400 banks across 72 countries while controlling for bank-specific characteristics. The data indicate that tighter regulations on bank entry and bank activities boost net interest margins. Inflation also exerts a robust, positive impact on bank margins. While concentration is positively associated with net interest margins, this relationship breaks down when controlling for regulatory impediments to competition and inflation. Furthermore, bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection, while these institutional indicators robustly explain cross-bank net interest margins. So, bank regulations cannot be viewed in isolation. They reflect broad, national approaches to private property and competition.

Keywords: Banks&Banking Reform; Economic Theory&Research; Environmental Economics&Policies; Payment Systems&Infrastructure; International Terrorism&Counterterrorism; Banks&Banking Reform; Economic Theory&Research; Environmental Economics&Policies; Insurance Law; Financial Intermediation (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-reg
Date: 2003-04-30
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