TAILIEUCHUNG - The Determinants of Bank Net Interest Margin: Evidence from the Lebanese Banking Sector

In this example, we considered six-month forward rates. We can consider forward rates that rule for different periods, for example 1-year, or 3-month or two-week forward rates. In the limit, as the period of the loan considered tends to zero, we arrive at the instantaneous forward rate. Instantaneous forward rates are a stylised concept that corresponds to the notion of continuous compounding, and are commonly used measures in financial markets. Instantaneous forward rates are the building block of our estimated yield curves, from which other representations can be uniquely derived | Journal of Money Investment and Banking ISSN 1450-288X Issue 23 2012 EuroJournals Publishing Inc. 2012 http The Determinants of Bank Net Interest Margin Evidence from the Lebanese Banking Sector Hassan Hamadi Faculty of Business Administration and Economics Notre Dame University Louaize Lebanon E-mail hhamadi@ Ali Awdeh Faculty of Economics and Business Administration Department of Finance The Lebanese University Hadath Lebanon E-mail Abstract This study analyses the determinants of commercial bank interest margins in Lebanon using bank-specific industry specific monetary policy and macroeconomic variables for the period 1996-2009. The empirical results indicate that interest rate margins are shaped differently between domestic and foreign banks. For instance domestic bank size liquidity efficiency and to a lower extent capitalisation and credit risk have a negative impact on interest margins. The same impact was captured by concentration dollarization and to a lower extent by economic growth. On the other hand the growth rate of deposits lending inflation central bank discount rate national saving domestic investment and to a lower degree the interbank rate all have a positive impact on net interest margins. For foreign banks we found that size liquidity capitalisation and credit risk do not show a significant impact. Another interesting remark is that the host market macroeconomic conditions industry characteristics central bank discount rate and interbank rate have much weaker impact for foreign bank interest margins. Keywords Interest Rate Net Interest Margin Foreign Banks Concentration. 1. Introduction Interest rate margin is among the most important factors that gauge the efficiency of financial institutions and wide interest margins are seen to have negative implications for financial intermediation and financial development. There are concerns mainly in the developing economies about .

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