MCI Jurnal.

What Drives the Interest Rate Margin Decline in EU Banking – The Case of Small Local Banks


* The authors are grateful to an anonymous referee for numerous valuable suggestions. An early draft of this paper was presented at 15th Tor Vergata Conference on Banking and Finance in Rome, 15th Annual Meeting of the European Accounting Association (EAA) in Lisbon, the Association Française de Finance 2007 International Meeting in Bordeaux and the 14th Annual Meeting of the German Finance Association. The authors also want to thank conference participants for their comments. The usual disclaimer applies. 1 The interest rate margin is defined as net interest income over total assets. 2 The effect of competition on relationship lending has been shown to depend on the question whether competition comes from other banks or capital markets. Boot/Thakor (2000) e. g. demonstrate that it is the latter source of competition that makes investing into relationship banking no longer worthwhile. See also Elsas (2005) and Degryse/Ongena (2007) in this respect
keyword : banking, markets