Financial Liberalization, Bank Market Structure, and Financial Deepening: An Interest Margin Analysis
Electronic Access:
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Summary:
The paper shows that commercial banks’ ability to lower deposit interest rates (market power) can increase deposit mobilization. Interest expenses saved can subsidize and lower fees on checking and branching services and thus help attract deposits. United States data illustrates the financial deepening effect of this market power. Commercial banks’ ability to lower deposit interest rates diminishes when their deposits become closer substitutes to nonbank liabilities requiring greater interest rate competition. Lack of bank deposit market power, including through capital account mobility, may lessen financial deepening.
Series:
Working Paper No. 2000/038
Subject:
Bank deposits Banking Commercial banks Deposit rates External debt Financial institutions Financial services Interest payments Interest rate ceilings Loans
English
Publication Date:
March 1, 2000
ISBN/ISSN:
9781451845686/1018-5941
Stock No:
WPIEA0382000
Pages:
30
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