Template-Type: ReDIF-Paper 1.0

Author-Name: Anna Burova
Author-Email: burovaab@cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation

Author-Name: Alexey Ponomarenko
Author-Email: ponomarenkoaa@cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation

Author-Name: Svetlana Popova
Author-Email: popovasv@cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation

Author-Name: Andrey Sinyakov
Author-Email: sinyakovaa@cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation

Author-Name: Yulia Ushakova
Author-Email: ushakovayuv@cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation


Title: Measuring heterogeneity in banks' interest rate setting in Russia 

Abstract: We use credit registry data on all corporate loans issued by all Russian banks 
since 2017 to decompose the bank interest spreads into a common factor, as well as 
borrower and lender-related components while controlling for loan characteristics. 
We find that variation in loan rates associated with lender-specific factors 
(heterogeneity of banks) and borrower-specific factors (heterogeneity of borrowers) 
is substantial. We use the identified bank-specific components to measure fragmentation 
of the corporate credit market in Russia. We illustrate the developments in the Russian 
credit market during the pandemic using the obtained estimates. The results indicate that 
heterogeneity in banks' interest rate setting is high and increased in the early stage 
of the pandemic. The range of borrower-related premiums charged by banks also widened 
(mostly due to increase in rates of loans to companies in sectors presumably affected 
by the pandemic). Finally, our results suggest that banks tightened non-interest loan 
conditions during the pandemic.

Length: 39 pages
Creation-Date: 2021-07
Revision-Date:
Publication-Status:
File-URL: http://www.cbr.ru/StaticHtml/File/124643/Measuring_Heterogeneity.pdf
File-Format: Application/pdf
File-Function:
Number:wps77
Classification-JEL: E44, E51, E52, E58, G21, G28.
Keywords: bank interest margin, bank interest spread, corporate credit, credit registry, 
financial stability, credit market fragmentation, Russian banking sector in the pandemic.
Handle:RePEc:bkr:wpaper:wps77