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Banking Spreads in Latin America

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  • Gaston Gelos

Abstract

Intermediation spreads in Latin America are high by international standards. This paper examines the determinants of bank interest margins in that region using bank and country-level data from 85 countries, including 14 Latin American economies. The results suggest that Latin America has higher interest rates, less efficient banks, and larger reserve requirements than other regions and that these factors have a significant impact on spreads. However, Latin American countries do not differ markedly from their peers in other aspects that are found important in determining the cost of financial intermediation, such as inflation and bank profit taxation.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/44.

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Length: 31
Date of creation: 01 Feb 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/44

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Keywords: Financial intermediation; Bank rates; Latin America; Interest rates; Taxation; banking; reserve requirements; bank spreads; deposit rate; bank interest; bank profit; bank size; bank interest margins; deposit rates; financial transaction; international standards; banking markets; banking crises; financial sector; banking sector; interest expense; reserve requirement; banking system; bank competition; bank credit; bank lending; banking systems; net interest margin; bank consolidation; banking regulations; financial markets; bank ownership; financial repression; bank entry; bank regulation; bank behavior; bank interest rate; financial systems; bank assets; banking market; bank policy; money market rate; financial intermediaries; net ? interest ? margin; financial liberalization; bank equity; bank credit allocation; financial services; financial system; deposit ? rate; bank funding; bank transaction; money market; disintermediation; bank spread; bank intermediation; bank profits;

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References

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  1. Claessens, Stijn & Laeven, Luc, 2004. "What Drives Bank Competition? Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(3), pages 563-83, June.
  2. Asli Demirguc-Kunt & Luc Laeven & Ross Levine, 2003. "Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation," NBER Working Papers 9890, National Bureau of Economic Research, Inc.
  3. Gelos, Gaston & Wei, Shang-Jin, 2004. "Transparency and International Portfolio Holdings," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4476, C.E.P.R. Discussion Papers.
  4. Brock, Philip L. & Rojas Suarez, Liliana, 2000. "Understanding the behavior of bank spreads in Latin America," Journal of Development Economics, Elsevier, Elsevier, vol. 63(1), pages 113-134, October.
  5. Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "Determinants of commercial bank interest margins and profitability : some international evidence," Policy Research Working Paper Series 1900, The World Bank.
  6. Agnes Belaisch, 2003. "Do Brazilian Banks Compete?," IMF Working Papers, International Monetary Fund 03/113, International Monetary Fund.
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Citations

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Cited by:
  1. Gabriel Martinez, 2010. "Cost of Borrowing, Institutional Quality, and Capital Openness," Working Papers, Ave Maria University, Department of Economics 1001, Ave Maria University, Department of Economics.
  2. Khemraj, Tarron, 2010. "The simple analytics of oligopoly banking in developing economies," MPRA Paper 22266, University Library of Munich, Germany.
  3. Guilherme Jonas Costa da Silva & José Luís Oreiro & Luiz Fernando de Paula & Rogério Sobreira, 2007. "Macroeconomic Determinants Of Banking Spread In Brazil: An Empirical Evaluation," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Gr 098, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  4. Francois Boutin-Dufresne & Santiago Peña & Oral Williams & Tomasz A. Zawisza, 2013. "Benchmarking Banking Sector Efficiency Across Regional Blocks in Sub-Saharan Africa," IMF Working Papers, International Monetary Fund 13/51, International Monetary Fund.
  5. Maudos, Joaquín & Solís, Liliana, 2009. "The determinants of net interest income in the Mexican banking system: An integrated model," Journal of Banking & Finance, Elsevier, Elsevier, vol. 33(10), pages 1920-1931, October.
  6. Fatih Macit, 2012. "Bank Specific and Macroeconomic Determinants of Profitability: Evidence From Participation Banks in Turkey," Economics Bulletin, AccessEcon, vol. 32(1), pages 586-595.
  7. Glocker, Ch. & Towbin P., 2012. "The Macroeconomic Effects of Reserve Requirements," Working papers, Banque de France 374, Banque de France.
  8. Parmendra Sharma & Neelesh Gounder, 2011. "Determinants of bank net interest margins in a Small Island Developing Economy: Panel Evidence from Fiji," Discussion Papers in Finance finance:201112, Griffith University, Department of Accounting, Finance and Economics.
  9. International Monetary Fund, 2010. "Post-Crisis Bank Behavior," IMF Working Papers, International Monetary Fund 10/1, International Monetary Fund.
  10. Jose M. Berrospide & Amiyatosh Purnanandam & Uday Rajan, 2008. "Corporate hedging, investment and value," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2008-16, Board of Governors of the Federal Reserve System (U.S.).
  11. Guilherme Jonas Costa da Silva & José Luís Oreiro & Luiz Fernando de Paula, 2007. "Macroeconomic Determinants of Bank Spread in Brazil: An Empirical Evaluation," Working Papers, Universidade Federal do Paraná, Department of Economics 0066, Universidade Federal do Paraná, Department of Economics.
  12. International Monetary Fund, 2012. "Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America," IMF Working Papers, International Monetary Fund 12/142, International Monetary Fund.
  13. Christian Glocker & Pascal Towbin, 2012. "The Macroeconomic Effects Of Reserve Requirements," EcoMod2012 3850, EcoMod.
  14. Valentina Flamini & Liliana Schumacher & Calvin A. McDonald, 2009. "The Determinants of Commercial Bank Profitability in Sub-Saharan Africa," IMF Working Papers, International Monetary Fund 09/15, International Monetary Fund.
  15. Bank for International Settlements, 2012. "Operationalising the selection and application of macroprudential instruments," CGFS Papers, Bank for International Settlements, number 48.
  16. Laura Valderrama & Wendell A. Samuel, 2006. "The Monetary Policy Regime and Banking Spreads in Barbados," IMF Working Papers, International Monetary Fund 06/211, International Monetary Fund.
  17. Calixte Ahokpossi, 2013. "Determinants of Bank Interest Margins in Sub-Saharan Africa," IMF Working Papers, International Monetary Fund 13/34, International Monetary Fund.
  18. Anoop Singh & Martin D. Cerisola, 2006. "Sustaining Latin America's Resurgence," IMF Working Papers, International Monetary Fund 06/252, International Monetary Fund.
  19. Nelson Souza-Sobrinho, 2010. "Macroeconomics of bank interest spreads: evidence from Brazil," Annals of Finance, Springer, Springer, vol. 6(1), pages 1-32, January.

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