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Differentiated Impact of Spread Determinants by Personal Loan Category: Evidence from the Brazilian Banking Sector

Author

Listed:
  • José Valente

    (Faculty of Economics, University of Coimbra)

  • Mário Augusto

    (CeBER and Faculty of Economics, University of Coimbra)

  • José Murteira

    (CeBER and Faculty of Economics, University of Coimbra, and CEMAPRE)

Abstract

The present article studies the determinants of banking spreads, allowing for the possibility that the impact of some of these determinants on spreads may differ according to the particular loan type. This concern is fostered by both theoretical and empirical evidence supporting the general idea that the hetero-geneity of banks’ loan portfolios should be taken into account when studying the drivers of spread. This approach is distinct from previous work in the liter-ature, usually utilizing a single interest margin per bank, in order to measure the impact of its determinants. Using a dataset of observations on various per-sonal loan categories and the Difference GMM approach, the present study es-timates that marginal effects of, respectively, banks’ risk aversion, credit risk, and market share on spreads differ significantly according to whether the loan is a consumer loan, a paycheck-linked credit line or a revolving credit line for individuals. These findings suggest, accordingly, that central banks and regula-tory agencies should observe the composition of banks’ loans portfolios when writing their policies aiming at spread reduction.

Suggested Citation

  • José Valente & Mário Augusto & José Murteira, 2018. "Differentiated Impact of Spread Determinants by Personal Loan Category: Evidence from the Brazilian Banking Sector," CeBER Working Papers 2018-12, Centre for Business and Economics Research (CeBER), University of Coimbra.
  • Handle: RePEc:gmf:papers:2018-12
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    Cited by:

    1. Thiago Trafane Oliveira Santos, 2021. "High Lending Interest Rates in Brazil: cost or concentration?," Working Papers Series 550, Central Bank of Brazil, Research Department.

    More about this item

    Keywords

    Spread; Personal loans; Financial sector.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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