Revisiting Bank Pricing Policies in Brazil: Evidence from Loan and Deposit Markets

Abstract

This paper addresses the micro and macroeconomic determinants of interest rates in the Brazilian banking market. The results suggest that banks fully adjust their loan interest rates to a change in the monetary policy rate, but we also observe a rigid short-term response for some loan product categories. The study confirms that pricing policies can vary substantially depending on the market. For example, microeconomic factors did not seem to be a major determinant of retail loan rates, but they were found to be important determinants of corporate loan or time deposit rates. As two additional results, market concentration was found to have a robust significant positive effect on loan rates and interest spreads, as well as the international risk perception of Brazil, as proxied by the EMBI Brazil.

JEL classification: G21 ; E43 ; E44