Consumer Loan Rate Dispersion and the Role of Competition: Evidence from the Turkish Banking Sector

51 Pages Posted: 27 Feb 2021

See all articles by Selva Baziki

Selva Baziki

Bloomberg LP

Yavuz Kılıç

affiliation not provided to SSRN

Muhammed Hasan Yilmaz

University of St Andrews School of Management; Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Date Written: December 28, 2020

Abstract

This paper aims to examine the degree of dispersion in the loan pricing of commercial banks and its association with competitive conditions. To this end, an indexation mechanism processing a novel bank-level dataset is proposed to quantify the lending rate variability in general-purpose, vehicle, and housing loans for the period January 2007-April 2020. In panel convergence tests, we show that there exists heterogeneity in long-term co-movements in banks’ loan pricing, while periods following the tightening in financial conditions display short-term deviations from general tendencies demonstrated by dispersion indices. The methodological setting also entails the construction of competition indicators for total and segment-based credit market developments. The competitive conditions monitored by Herfindahl-Hirschman Indicator (HHI) present that housing and vehicle loan segments have been concentrated in recent years. Quantile regression results further validate that improvements in the competition are associated with a lower level of lending rate dispersion in housing and vehicle segments in a statistically significant manner, whereas this relation is not applicable for general-purpose loans.

Keywords: Loan Rate Dispersion, Competition, Log-t Convergence Test, Quantile Regression

JEL Classification: C31, C33, G21, D40

Suggested Citation

Baziki, Selva and Kılıç, Yavuz and Yilmaz, Muhammed Hasan, Consumer Loan Rate Dispersion and the Role of Competition: Evidence from the Turkish Banking Sector (December 28, 2020). Available at SSRN: https://ssrn.com/abstract=3756276 or http://dx.doi.org/10.2139/ssrn.3756276

Selva Baziki

Bloomberg LP ( email )

731 Lexington Ave
New York, NY 10022
United States

Yavuz Kılıç

affiliation not provided to SSRN

Muhammed Hasan Yilmaz (Contact Author)

University of St Andrews School of Management ( email )

The Gateway North Haugh
St Andrews, KY16 9RJ
United Kingdom

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
20
Abstract Views
167
PlumX Metrics