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Differentiated impact of spread determinants by personal loan category: Evidence from the Brazilian banking sector

Author

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  • Valente, José
  • Augusto, Mário
  • Murteira, José

Abstract

The empirical literature on the determinants of banking spreads has considered banks as providers of one single product. According to this approach, the study of the effect of bank spreads determinants has assumed that this effect is uniform across the different types of loans offered by banks. The present study assesses the hypothesis that banking spreads attributes have a differentiated impact on spreads, according to the loan category. To this end, we adopt a dynamic model, estimated through System GMM based on a dataset of interest spreads charged on three categories of personal loans in Brazil. Our results support the hypothesis of differentiated impacts according to loan category, and are corroborated by a robustness check, carried out through Difference GMM estimation of the adopted model. Overall, these findings also suggest that regulators should observe the composition of banks’ loans portfolios when designing and implementing policies aiming at banking spread reduction.

Suggested Citation

  • Valente, José & Augusto, Mário & Murteira, José, 2024. "Differentiated impact of spread determinants by personal loan category: Evidence from the Brazilian banking sector," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 299-315.
    • Handle: RePEc:eee:reveco:v:89:y:2024:i:pb:p:299-315
    DOI: 10.1016/j.iref.2023.10.025
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    More about this item

    Keywords

    Banking spread; Determinants; Personal loans; Financial sector;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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