This paper analyses the determinants of interest margins of the banking firms.Our starting point is the methodology developed in the original study by Ho andSaunders (1981) and later extensions, but widened to take banks¿ operating costsexplicitly into account. In the developed model the interest margin depends on theoperating expenses of the banks in addition to the interest and credit risks and the levelof competition in the banking markets. For the empirical contrast of the model a panelof firms of the Spanish banking sector for the period 1992-1999 is used. The resultsshow that the fall of margins in the Spanish banking system are due to a reduction in theoperating expenses and in the uncertainty in the financial markets (interest rate risk) thathave counteracted the increase in the market power in the banking firms. Este trabajo analiza los determinantes del margen de intermediación de las entidades bancarias. El modelo desarrollado por Ho y Saunders (1981) es ampliado para tener en cuenta los costes de producción. En el modelo elaborado, el margen de intermediación de las entidades bancarias tiene como elementos fundamentales, además del riesgo de tipo de interés, de crédito y el grado de competencia, los costes operativos medios en los que incurre la entidad. El contraste empírico se realiza para un panel de entidades del sector bancario español durante el periodo 1992-1999. Los resultados muestran que los descensos en el margen de intermediación se derivan de una reducción en los costes operativos y en la incertidumbre de los mercados monetarios (riesgo de tipos de interés) que han contrarrestado el efecto de un crecimiento en el poder de mercado de las empresas bancarias durante el periodo analizado.
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number
2003-05.
Find related papers by JEL classification: G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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