Determinants of Credit Growth and Interest Margins in the Philippines and Asia
May 1, 2012
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Summary
Despite robust deposit growth, credit growth has been sluggish in the Philippines. We attribute this to legacy weaknesses in bank balance sheets, consumption-led economic growth, and relatively high net interest margins. Bank-level analysis suggests that interest margins in the Philippines rise with bank size, bank capitalization, foreign ownership, overhead costs and tax rates. Using bank-level data for a number of Asian economies, we find that higher growth, lower inflation, higher reserve requirements, greater banking sector development, smaller stock market development and lower government deficits reduce net interest margins, informing the policy debate on strengthening financial intermediation in the Philippines.
Subject: Bank credit, Banking, Commercial banks, Credit, Credit booms, Financial institutions, Loans, Money
Keywords: bank capitalization, bank Capitalization, Bank credit, bank size, Central and Eastern Europe, Commercial banks, Credit, Credit booms, credit growth, deposit base, Fed fund rate, financial system, Loans, market share, net interest margins, Philippines, private sector, WP
Pages:
25
Volume:
2012
DOI:
Issue:
123
Series:
Working Paper No. 2012/123
Stock No:
WPIEA2012123
ISBN:
9781475503524
ISSN:
1018-5941
