Determinants of Bank Interest Margins in Mongolia

Abstract

Research on interest margin is an interesting issue since it has been one of the measures of banks efficiency as well as it defines a part of banking system development. This study investigates Net interest margin and its determinants of the Mongolian Commercial banks over the period of 2004-2010.Net Interest margin is determined by Bank Specific variables using Panel data estimation techniques. According to the estimation carried out for the Mongolian banking system, the evidence reveals that, net interest margin positively affects by the level of market concentration (Mongolian banks tend to increase interest margin when market concentration increases), by the level of Capitalization (higher the risk aversion tend to have a higher net interest margin), and operating cost as well as credit risk are negatively associated with interest margin. Keywords Net interest margin, Credit risk, Banking system, concentration, Foreign bank, Market structure