The determinants of bank net interest margin: Evidence from the Lebanese banking sector

H Hamadi, A Awdeh - 2012 - mpra.ub.uni-muenchen.de
2012mpra.ub.uni-muenchen.de
This study analyses the determinants of commercial bank interest margins in Lebanon using
bank-specific, industry specific, monetary policy, and macroeconomic variables for the
period 1996-2009. The empirical results indicate that interest rate margins are shaped
differently between domestic and foreign banks. For instance, domestic bank size, liquidity,
efficiency, and to a lower extent, capitalisation and credit risk, have a negative impact on
interest margins. The same impact was captured by concentration, dollarization, and to a …
This study analyses the determinants of commercial bank interest margins in Lebanon using bank-specific, industry specific, monetary policy, and macroeconomic variables for the period 1996-2009. The empirical results indicate that interest rate margins are shaped differently between domestic and foreign banks. For instance, domestic bank size, liquidity, efficiency, and to a lower extent, capitalisation and credit risk, have a negative impact on interest margins. The same impact was captured by concentration, dollarization, and to a lower extent, by economic growth. On the other hand, the growth rate of deposits, lending, inflation, central bank discount rate, national saving, domestic investment, and to a lower degree, the interbank rate, all have a positive impact on net interest margins. For foreign banks, we found that size, liquidity, capitalisation, and credit risk, do not show a significant impact. Another interesting remark is that the host market macroeconomic conditions, industry characteristics, central bank discount rate, and interbank rate, have much weaker impact for foreign bank interest margins.
mpra.ub.uni-muenchen.de
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