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Institute of Public Finance

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Determinants of banks’ net interest margins in Central and Eastern Europe

Mirna Dumičić, Croatian National Bank, Zagreb, Croatia
Tomislav Rizdak, Croatian National Bank, Zagreb, Croatia

This research analyzes the main determinants of the net interest margin of banks operating in Central and Eastern European (CEE) countries in the period from 1999 to 2010. The results reveal several main drivers of net interest margins in the CEE. Prior to 2008 the net interest margins declined primarily due to strong capital inflows and stable macroeconomic environment. In the crisis period, significant rise in government debt accompanied by the increase in macroeconomic risks and abating capital inflows were pushing margins up while other factors such as low credit demand, higher capitalization and significantly increased share of non-performing loans pressured banks’ margins down. The results also confirm the important contribution of higher efficiency to lowering banks’ margins.

Keywords:  net interest margin; CEE

Year:  2013   |   Volume:  37   |   Issue:  1   |   Pages:  1 - 30   

Full text (PDF)   |   DOI: 10.3326/fintp.37.1.1   |   E-mail this article   |   Download to citation manager
 March, 2013
I / 2013
EBSCO Publishing
ISSN 1846-887X
e-ISSN 1845-9757
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