The Determinants of Bank Interest Margin:An Empirical Evidence of Taiwan Corporative Bank

• Main Authors: Shwu-Fen Tsay, 蔡淑芬
• Other Authors: Der-Tzon Hsieh
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/73347498731100838154

碩士 === 臺灣大學 === 經濟學研究所 === 98 === Interest rate liberalization and approval of founding new banks by the Financial Supervisory Authorities in the 90s mark the trend of declining interest margins. However, the change of interest margins can be predicted by looking at the main determinants of change for banks’ better adjustments of funding costs and strategies, which result in profitability. This empirical case study with Taiwan Cooperative Bank is to explore the determinants of bank interest margin. In our research scheme, we first discuss the determinants of lending rates, deposit rates and interest margins, further we test with our empirical models to verify its forecasting performance. In this study, the empirical model is derived from the quantitative methods such as Unit Root Test, LM Test and Polynomial Distributed Lag Model. Following conclusions can be drawn from this empirical result: 1. Interest margins are influenced with significant negative correlations by the current and lag one period’s discount rates, and significant positive correlations by lag 2-5 periods’ discount rates, which implies the interest margins will widen during one or two months following lowering discount rates, diminish after three months, and will still narrow in the long run. 2. Interest margins are influenced with significant negative correlations by the current period’s prime rates, and significant positive correlations by lag 1-2 periods’ prime rates, which implies the interest margins will widen in the current month following lowering prime rates, diminish one month later, and will still narrow in the long run. 3. Current period of interest margins are influenced with significant positive correlations by Industrial Production Index, which suggests with strong funding demands in prosperity, banks will widen its interest margins. 4. Current period of interest margins are influenced with significant negative correlations by the balances of M2, which suggests with diminishing investment and consumer spending in depression, banks will narrow its interest margins.