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Banking consolidation and margins on bank loan and deposit transactions of non-financial corporations in Spain

Author

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  • Luis Medrano Adán
  • Vicente Salas Fumás

Abstract

This article analyses the effects of the European Central Bank’s (ECB) monetary policy and of banking consolidation on the interest rates and margins on monthly new loan and deposit transactions with non-financial corporations (NFCs) in Spain in the period January 2003 to June 2025. The results indicate an increase in market power – as measured by the Lerner index (or relative margin) – in the post-consolidation period, leading to higher (lower) loan (deposit) rates for a given euro interbank offered rate (EURIBOR), although the largest changes in banks’ market power over the period are driven by movements in the EURIBOR. The article explains the responsiveness of banks’ market power (Lerner index) to changes in the EURIBOR using a theoretical model of bank competition. It also argues that because the EURIBOR is unrelated to bank competition, its demonstrated influence on the Lerner index calls into question the latter’s use as a general indicator of market competition.

Suggested Citation

  • Luis Medrano Adán & Vicente Salas Fumás, 2025. "Banking consolidation and margins on bank loan and deposit transactions of non-financial corporations in Spain," Financial Stability Review, Banco de España, issue Autumn.
    • Handle: RePEc:bde:revisl:y:2025:i:11:n:4
    Note: 49
    as

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    File URL: https://www.bde.es/f/webbe/GAP/Secciones/Publicaciones/InformesBoletinesRevistas/RevistaEstabilidadFinanciera/25/4_FSR49_Consolidacion.pdf
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