The impact of recapitalisations and bank competition on Greek bank net interest margins

Mamatzakis, Emmanuel (2024) The impact of recapitalisations and bank competition on Greek bank net interest margins. Journal of Economic Studies , ISSN 0144-3585.

Abstract

This study investigates the reasons behind the very high net interest margins in the Greek banking industry compared to the euro-area, focusing on the association between bank competition and recapitalisations. We conduct a dynamic panel analysis covering the period from the early 2000s to 2021, that controls for possible endogeneity and treats for heterogeneity. We also employ local projections impulse response functions that control for structural changes in Greek banking. We find that low bank competition has contributed to high net interest margins in Greece. Interestingly, the impact of recapitalisations conditional to low bank competition has had a significant further impact on increasing net interest margins, which is a noteworthy case due to several Greek bank recapitalisations in the last ten years. Our findings are supported by local projections impulse response functions. To mitigate distortions in bank competition, we argue to accelerate steps toward the direction of the banking union and a common bank regulation framework in the euro-area.

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