Document Type : Research Paper
Abstract
Given the importance of the money market in Iran, this study tries to examine effective factors on net interest margin with an emphasis on market structure and credit risk. Research methodology is based on econometric panel data from 13 commercial banks in the years of 2006-2013. The findings emerged from data analysis show that the average of net interest margin is 4.1 percent at commercial banks. Also market concentration index confirms competitive structure at money market. Credit risk calculations also show that 1.15 percent of bank facilities and receivables has become to past due receivables, Deferred and doubtful. In accordance with the results of the data analysis, the findings of estimation model also confirms the existence of imperfect competition in the money market. Other finding indicates a positive influence of credit risk and administrative costs on net interest margin. However, the bank facilities do not have a significant effect on net interest margin. Because of the large size of government and consequently the dependence of monetary policy to fiscal policy, bank facilities are binding directly or indirectly.
Keywords
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Sub-Saharan Africa. IMF Working Paper, WP/13/34. ##Allen, L. (1988). The Determinants of Bank Interest Margins: A Note. Journal of Financial and Quantitative Analysis, 23(20): 231-235. ##Angbazo, L. (1997). Commercial Bank Net Interest Margins, Default Risk, Interest Rate Risk and Off-Balance Sheet Banking. Journal of Banking and Finance, 21(1): 55-87. ##Barajas, A., R. Steiner & N. Salazar. (1999). Interest Spreads in Banking in Colombia, 1974-96. IMF Staff Papers: 46(2): 196-224. ##Ben Nassar, K., E. Martinez & A. Pineda. (2014). Determinants of Bank’s Net Interest Margin in Honduras. IMF Working Paper, WP/14/163. ##Bresnahan, T.F. (1982). The Oligopoly Solution Concept Is Identified. Economics Letters, 10(1–2): 87-92. ##Caprio, G. (1996). Banking on Financial Reform? A Case of Sensitive Dependence on Initial Conditions. In G. Caprio, I. Atiyas and W.J. Hanson, eds., Financial Reform: Theory and Experiencee. New York: Cambridge University Press. ##Carbo, V.S. & F.F. Rodriguez. (2007). The Determinants of Bank Margins in European Banking. Journal of Banking and Finance, 31(7): 2043-2063. ##Cho, Y.J. (1988). The Effect of Financial Liberalization on the Efficiency of Credit Allocation: Some Evidence from Korea. Journal of Development Economics, 29(1): 101-110. ##Da Silva, G.J.C. & L.A.S. Lívia Abrão. (2015). Basic Interest Rate, Bank Competition and Bank Spread in Personal Credit Operations in Brazil: A Theoretical and Empirical Analysis. Economia, 16: 32-45. ##De Haan, J. & T. Poghosyan. (2012). Bank Size, Market Size, Market Concentration and Bank Earnings Volatility in the U.S.. Journal of International Financial Markets, Institutions and Money, 22(1): 35-54. ##Demirgüç, A. & H. Huizinga. (1999). Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence. World Bank Economic Review, 13(2): 379-408. ##Drakos, K. (2002). The Dealership Model for Interest Margins: The Case of the Greek Banking Industry. Journal of Emerging Finance, 1(1): 75-98. ##Fry, M. (1995). Money, Interest and Banking in Economic Development, Second Edition. Baltimore: Johns Hopkins University Press. ##Grenade, K.H.I. (2007). Determinants of Commercial Banks Interest Rate Spreads: Some Empirical Evidence from the Eastern Caribbean Currency Union. Eastern Caribbean Central Bank Staff Research Paper, WP/ 07/01. ##Hadad, M.D., W. Santoso & S.B. Dwityapoetra. (2003). Intermediation Cost Study of Some Banks in Indonesia: Is Interest Credit Banks Overpriced?. Bank Indonesia Working Paper, Jakarta: Bank of Indonesia. ##Ho, T.S.Y. & A. Saunders. (1981). The Determinants of Bank Interest Margins: Theory and Empirical Evidence. Journal of Financial and Quantitative Analysis, 16(4): 581-600. ##Männasoo, K. (2012). Determinants of Bank Interest Spread in Estonia. Working Paper Series, Available on the Eesti Pank website at: www.bankofestonia.ee/pub/en/dokumendid/publikatsioonid/seeriad/uuringud/.##Maudos, J. & J.F. Guevara. (2004). Factors Explaining the Interest Margin in the Banking Sectors of the European Union. Journal of Banking and Finance, 28(9): 2259-2281. ##McKinnon, R.I. (1973). Money and Capital in Economic Development, Washington: The Brookings Institution. ##McShane, R.W. & I.G. Sharpe. (1985). A Time Series/Cross Section Analysis of the Determinants of Australian Trading Bank Loan/Deposit Interest Margins: 1962-1981. Journal of Banking and Finance, 9(1): 115-136. ##Naceur, S.B. (2003). The Determinants of the Tunisian Banking Industry Profitability: Panel Evidence. Universite Libre de Tunis Working Papers, www.mafhoum.com/press6/174E11.pdf##Nakane, M.I. (2001). A Test of Competition in Brazilian Banking. Working Paper Series, 12: 1-24. ##Plakalović, N. & A. Alihodžić. (2015). Determinants of the Net Interest Margins in BH Banks. Industry / Industrija, 43(1):133-153. ##Porter, M.E. (1979). How Competitive Forces Shape Strategy. Harvard Business Review, 55(2): 137-145. ##Randall, R. (1998). Interest Rate Spreads in the Eastern Caribbean. IMF Working Paper, Pp. 59 and 98. ##Rebei, N. (2014). Determinants of Interest Rate Spreads in Solomon Islands. IMF Working Paper, WP/14/105. ##Shaw, E.M. (1973). Financial Deepening in Economic Development. Oxford University Press. ##Were, M. & J. Wambua. (2014). What Factors Drive Interest Rate Spread of Commercial Banks? Empirical Evidence from Kenya. Review of Development Finance, 4: 73-82. ##
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