| The purpose of this research was to determine the relevance of interest rate variation on loans to the net interest margin (NIM) of banks in Batangas City. The data gathered from 25 banks were analyzed and interpreted using frequency and percentage, weighted mean and ordinal regression. The study revealed that interest rate policy, market-based factors and lending considerations are greatly considered by banks in deciding on the rate to be imposed on loans. The study also found out that both internal and external factors immensely affect the NIM. Similarly, the varying interest rates of interbank, microfinance, and SME loans reflect changes on the NIM of banks in Batangas City. Importance is placed into the first mentioned loan because it includes huge amount of money and a higher than usual interest rate, while the latter two are both economical and in demand for the year under study. Considering all these, banks are advised to use the guidelines provided in this research. If banks would want to focus on improving NIM, they should raise their cost consciousness, maintain the required capital and bank assets, enhance process efficiency, develop their risk management systems, ensure tax compliance, handle efficiently implicit interest payments, cope with inflationary pressures, assess, formulate and implement market risk management policy, and expand foreign ownership influence. Banks must reach or exceed their money boundary and should also be concerned about improving their product plan regarding microfinance and SME loan. |
Abreu, M., & V. Mendes. (2003). Do macro-financial variables matter for european bank interest margins and profitability? Paper presented at EcoModNetwork Conference, Istanbul.
Avery, Robert, Bostic, Rapahel, Calem, Paul & Canner, Glenn. (2002). Credit risk, credit scoring, and the performance of home mortgages. Federal Reserve Bulletin.
Boyd, John H, & De Nicolo, Gianni. (2005). The theory of bank risk taking and competition revisited. Journal of Finance, 60 (3), 1329-1343.
Boyd, John H, De Nicoló, Gianni & Smith, Bruce D. (2004). Crises in competitive versus monopolistic banking systems. Journal of Money, Credit, and Banking, 36 (3), 487-509.
Brock, Philip L. & Rojas Suarez, Liliana. (2000). Understanding the behavior of bank spreads in Latin America. Journal of Development Economics, 63, 113–134.
Claeys, S. & R. Vander Vennet. (2008). Determinants of bank interest margins in Central and Eastern Europe: a comparison with the west . Economic Systems, 32,197-216.
Deryugina Elena, Kovalenko Olga, Pantina Irina & Ponomarenko, Alexey. (2015). "Disentangling loan demand and supply shocks in Russia". Bank of Finland, BOFIT Institute for Economies in
Transition Discussion Papers.
Doliente, Jude. (2003). Determinants of banks’ net interest margin of South East Asia. University of the Philippines, Diliman. December.
Fungacova, Z., & T. Poghosyan. (2009). Determinants of bank interest margins in Russia: Does bank ownership matter? BOFIT Discussion Papers 22.
Garza-García & Gustavo, Jesus. (2010). What influences net interest rate margins? developed versus developing countries. Banks and Bank Systems, 5 (4), 1771-1786.
Grenade, Kari H I. (2007). Determinants of commercial banks interest rate spreads: some empirical evidence from the Eastern Caribbean Currency Union. Eastern Caribbean Central Bank Research Department Working Papers (March).
Honohan, P. (2003). Avoiding the pitfalls in taxing financial intermediation. World Bank Policy Research Working Paper Series, No. 3056.
Jiangli, W., Unal, H., & C Yom. (2004). Relationship lending, accounting disclosure and credit availability during crisis. Federal Deposit Insurance Corporation Working Paper.
Khan, Waseem Ahmad & Sattar, Abdul. (2014). Impact of interest rate changes on the profitability of four major commercial banks in Pakistan. International Journal of Accounting and Financial Reporting, 4 (1).
Khrawish, Husni, Mohammad Al-Abadi & MaysoonHejazi. (2008). Determinants of commercial bank interest margin: Evidence from Jordan. Jordan Journal of Business Administration, 4 (4), 485-502.
Kwan, Simon. (2001). Financial modernization and banking theories. .FRBSF Economic Letter.No. 37.
Maudos, Joaquín & Solís, Liliana. (2009). The determinants of net interest income in the mexican banking system: An integrated model. Working Paper. Valencia: Inst. Valenciano de
Investigaciones Económicas.
Mistrulli, Paolo Emilio & Gambacorta, Leonardo. (2011). Bank heterogeneity and interest rate setting: What lessons have we learned since lehman brothers? BIS Working Papers No 359.
Monetary and Economic Department.
Morales, Rafael A. (2013). The banking regulations review: Philippines. Law Business Research Ltd, London, UK.
Orrick, Herrington & Sutcliffe. (2012). Microfinance: Advocates for international development: Lawyers eradicating poverty.
Quintyn, Marc & Taylor, Michael W. (2004). Should financial sector regulators be independent? International Monetary Fund, Economic Issues No. 32.
Ruiz Ortega, Claudia, Morais, Bernardo, & Peydro, Jose-Luis. (2015). The international bank lending channel of monetary policy rates and quantitative easing: Credit supply, reach-for-yield, and real effects. International Finance Discussion Papers.
Saunders, A. & L. Schumacher. (2000). The determinants of bank interest margins: an international study. Journal of International Money and Finance, 19 (1), 813-832.
Vishwanathan, Vivina. (2012). Net interest margin: It is important to look at relative NIMs to ascertain bank valuation.
Were, Maureen & Wambua, Joseph. (2014). What factors drive interest rate spread of commercial banks? empirical evidence from Kenya. Review of Development Finance, 4 (2), 73-82.
www.bis.org/publ/bcbs108.htm.
www.federalreserve.gov/bankinforeg/topics/market_risk_mgmt.htm.
www.fsa.go.jp/en/refer/manual/yokin_e/y09.pdf.
www.investopedia.com/articles/forex/11/central-bank-inflationfighting.asp#ixzz3zitEvqeR.
www.investopedia.com/terms/i/interbankrate.asp#ixzz3wVDqTKFX.
www.wikinvest.com/rate/Philippines_Interbank_Offered_Rate_(PHIBOR) |