Determinants of bank interest spread in Estonia
The recent global financial turmoil increased bank interest spreads in Estonia to the highest levels recorded since the Russian crisis in 1998- 1999. The pure spread concept and the two-step estimation approach of Ho and Saunders (1981) have been used to decompose the interest spreads in Estonia. The pure spread is mainly determined by risk aversion and the market structure of the banking sector, with money market interest volatility playing quite a modest role in the long-term equilibrium. The regulatory, efficiency and bank-portfolio effects share a roughly equal weight in the observed spread, whereas credit risk adds only a tiny portion to the mark-up. Strong liquidity and foreign capital permit lower spreads
|Date of creation:||22 Feb 2012|
|Date of revision:||22 Feb 2012|
|Contact details of provider:|| Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA|
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References listed on IDEAS
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- Drakos, Kostas, 2003. "Assessing the success of reform in transition banking 10 years later: an interest margins analysis," Journal of Policy Modeling, Elsevier, vol. 25(3), pages 309-317, April.
- Maudos, Joaquin & Fernandez de Guevara, Juan, 2004.
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- Claeys, Sophie & Vander Vennet, Rudi, 2008. "Determinants of bank interest margins in Central and Eastern Europe: A comparison with the West," Economic Systems, Elsevier, vol. 32(2), pages 197-216, June.
- Hawtrey, Kim & Liang, Hanyu, 2008. "Bank interest margins in OECD countries," The North American Journal of Economics and Finance, Elsevier, vol. 19(3), pages 249-260, December.
- Poghosyan, Tigran, 2010. "Re-examining the impact of foreign bank participation on interest margins in emerging markets," Emerging Markets Review, Elsevier, vol. 11(4), pages 390-403, December. Full references (including those not matched with items on IDEAS)
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