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Revisiting Bank Pricing Policies in Brazil: Evidence from Loan and Deposit Markets

Author Info

  • Leonardo S. Alencar

    ()

    (Banco Central do Brasil)

Abstract

This paper addresses the micro and macroeconomic determinants of interest rates in the Brazilian banking market. The results suggest that banks fully adjust their loan interest rates to a change in the monetary policy rate, but we also observe a rigid short-term response for some loan product categories. The study confirms that pricing policies can vary substantially depending on the market. For example, microeconomic factors did not seem to be a major determinant of retail loan rates, but they were found to be important determinants of corporate loan or time deposit rates. As two additional results, market concentration was found to have a robust significant positive effect on loan rates and interest spreads, as well as the international risk perception of Brazil, as proxied by the EMBI Brazil.

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Article provided by Central Bank of Argentina, Economic Research Department in its journal Ensayos Económicos.

Volume (Year): 1 (2012)
Issue (Month): 67 (December)
Pages: 35-71

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Handle: RePEc:bcr:ensayo:v:1:y:2012:i:67:p:35-71
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Keywords: banks; bank spread; Brazil; interest rates;

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Find related papers by JEL classification:
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
  • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
  • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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  1. Chang, E.J. & Guerra, S.M. & Lima, E.J.A. & Tabak, B.M., 2008. "The stability-concentration relationship in the Brazilian banking system," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(4), pages 388-397, October.
  2. Alegria, Carlos & Schaeck, Klaus, 2008. "On measuring concentration in banking systems," Finance Research Letters, Elsevier, vol. 5(1), pages 59-67, March.
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Cited by:

  1. Barbi, Fernando C., 2014. "Determinants of Credit Expansion in Brazil," MPRA Paper 19535, University Library of Munich, Germany, revised 13 Sep 2014.
  2. Ornelas, José Renato Haas & Barbachan, José Santiago Fajardo & Farias, Aquiles Rocha de, 2012. "Estimating Relative Risk Aversion, Risk-Neutral and Real-World Densities using Brazilian Real Currency Options," EBAPE Working Papers 1, EBAPE | Escola Brasileira de Admistração Pública e de Empresas (Brazil).
  3. Benjamin M. Tabak & Marcelo Yoshio Takami & J. M. C. Rocha & Daniel O. Cajueiro, 2011. "Directed Clustering Coefficient as a Measure of Systemic Risk in Complex Banking Networks," Working Papers Series 249, Central Bank of Brazil, Research Department.

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