tailieunhanh - DETERMINANTS OF COMMERCIAL BANKS INTEREST RATE SPREADS: SOME EMPIRICAL EVIDENCE FROM THE EASTERN CARIBBEAN CURRENCY UNION

But while there are differences in profitability and target markets, there are not big differences in loan portfolio quality. The top row of Table 3 reports on the quality of loan portfolios for different kinds of institutions, and we show that all in fact do quite well. We focus on nongovernmental organizations, non-bank financial institutions, and banks. For each group, the range of experience is captured with data at the 25th percentile, median, and 75th percentile. “Portfolio at risk” gives the outstanding balance of loans for which installments are more than 30 days overdue, expressed as. | Research Department Working Papers DETERMINANTS OF COMMERCIAL BANKS INTEREST RATE SPREADS SOME EMPIRICAL EVIDENCE FROM THE EASTERN CARIBBEAN CURRENCY UNION by Kari H I Grenade March 2007 Code WP 07 01 EASTERN CARIBBEAN CENTRAL BANK ECCB Staff Research Paper WP 07 01 Determinants of Commercial Banks Interest Rate Spreads Some empirical Evidence from the Eastern Caribbean Currency Union KARI H. I. GRENADE Abstract Disclaimer The Eastern Caribbean Central Bank ECCB strongly supports academic freedom and a researcher s right to publish and encourages such activity among its employees. However the EccB as an institution does not endorse the viewpoint of an employee s publication or guarantee its technical correctness. The views and opinions expressed in this paper are solely those of the author s and do not necessarily state or reflect those of the Eastern Caribbean Central Bank. No part of this publication shall be used for advertising or product endorsement purposes. A trend analysis of commercial banks interest rate spreads in the Eastern Caribbean Currency Union ECCU over the period 1993 to 2003 exposes two stylised facts. First spreads have been strong and persistently showing little signs of narrowing and second foreign owned banks have been operating with larger spreads compared to their indigenous counterparts. This study employs panel data techniques to measure the relevance of micro and macro factors in determining commercial banks interest rate spreads over the period. The results indicate that the observed spreads can be attributed to the high level of market concentration high operating costs and non- performing loans and the central bank s regulated savings deposit rate. JEL Classification Numbers E43 E44 Keywords ECCU Interest Rate Spreads Commercial Banks Kari Grenade has been employed as an Economist in the Research Department of the ECCB since 2004. Her email address is . Gratitude is expressed to the staff of the .