Determinants of the intermediation margin in the Peruvian case

This study examines the determinants of the net interest margin in the Peruvian banking system during the period from December 1993 to June 1997. The research focuses on identifying the components of this margin and analyzing how microeconomic and macroeconomic factors influence its evolution, using monthly data and the panel data econometric technique to capture intertemporal and cross-institution variations. The findings reveal a decline in financial margins in both domestic and foreign currencies, attributed primarily to improvements in the efficiency of banking institutions and changes in portfolio quality. Despite high market concentration, there is no evidence of a lack of competition, as the largest institutions have adjusted their margins in response to market liberalization. The policy implications suggest that financial reforms have fostered a competitive environment that could stabilize and improve the health of the banking system through increased productivity and reduced dependence on macroeconomic factors. (Abstract and audio: Department of Economic Publications)