Differentiated Impact of Spread Determinants by Personal Loan Category: Evidence from the Brazilian Banking Sector
The present article studies the determinants of banking spreads, allowing for the possibility that the impact of some of these determinants on spreads may differ according to the particular loan type. This concern is fostered by both theoretical and empirical evidence supporting the general idea that the hetero-geneity of banks’ loan portfolios should be taken into account when studying the drivers of spread. This approach is distinct from previous work in the liter-ature, usually utilizing a single interest margin per bank, in order to measure the impact of its determinants. Using a dataset of observations on various per-sonal loan categories and the Difference GMM approach, the present study es-timates that marginal effects of, respectively, banks’ risk aversion, credit risk, and market share on spreads differ significantly according to whether the loan is a consumer loan, a paycheck-linked credit line or a revolving credit line for individuals. These findings suggest, accordingly, that central banks and regula-tory agencies should observe the composition of banks’ loans portfolios when writing their policies aiming at spread reduction.