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The impact of bank regulations, concentration, and institutions on bank margins, Volume 1
Author:Demirguc, Asli; Laeven, Luc; Levine, Ross; Date Stored:2003/05/30
Document Date:2003/04/30Document Type:Policy Research Working Paper
SubTopics:Environmental Economics & Policies; International Terrorism & Counterterrorism; Economic Theory & Research; Payment Systems & Infrastructure; Banks & Banking Reform; Insurance Law; Financial IntermediationLanguage:English
Report Number:WPS3030Sub Sectors:Banking
Collection Title:Policy, Research working paper ; no. WPS 3030Volume No:1

Summary: This paper examines the impact of bank regulations, concentration, inflation, and national institutions on bank net interest margins using data from over 1,400 banks across 72 countries while controlling for bank-specific characteristics. The data indicate that tighter regulations on bank entry and bank activities boost net interest margins. Inflation also exerts a robust, positive impact on bank margins. While concentration is positively associated with net interest margins, this relationship breaks down when controlling for regulatory impediments to competition and inflation. Furthermore, bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection, while these institutional indicators robustly explain cross-bank net interest margins. So, bank regulations cannot be viewed in isolation. They reflect broad, national approaches to private property and competition.

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