Determinants of net interest margin in the Albanian banking system
Author: Irini Kalluci
Printed on: 16.07.2010
Production date: 14.12.2010
Material category : Not Periodic Publications / Working Papers
Research on banking system efficiency has always been a debatable
and interesting issue. This paper analyses net interest margin as
a measure of efficiency for the banks which operate in Albanian
banking system and the main focus is the identification of the factors
that affect this indicator. According to the estimations carried out for
the Albanian banking system, the results show that the net interest
margin is positively affected by the interest rate volatility (mainly of
euribor, domestic currency’s and slightly of the libor rate), by the level
of operating expenses which have had an increasing tendency and
by the amount of banks’ reserves in the Central B ank. Other factors
that affect the net interest margin are the level of bank capitalization,
which should be interpreted with caution; net commission incomes
which are negatively related to the dependent variable implying that
these two indicators are substitutes of each-other; the effectiveness
of management work; credit risk and the concentration level in terms
of loans.