TY - JOUR AU - Demirguc-Kunt,Asli AU - Laeven,Luc AU - Levine,Ross TI - Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation JF - National Bureau of Economic Research Working Paper Series VL - No. 9890 PY - 2003 Y2 - August 2003 UR - http://www.nber.org/papers/w9890 L1 - http://www.nber.org/papers/w9890.pdf N1 - Author contact info: Asli Demirguc-Kunt The World Bank 1818 H Street Washington, DC 20433 E-Mail: ademirguckunt@worldbank.org Luc Laeven Deputy Division Chief International Monetary Fund 700 19th Avenue, NW Washington, DC 20431 Tel: 202/623-9020 Fax: 202/623-4740 E-Mail: Llaeven@imf.org Ross Levine Haas School of Business University of California at Berkeley 545 Student Services Building, #1900 (F685) Berkeley, CA 94720-1900 Tel: 510-643-1419 E-Mail: Ross_levine@haas.berkeley.edu AB - This paper examines the impact of bank regulations, market structure, and national institutions on bank net interest margins and overhead costs using data on over 1,400 banks across 72 countries while controlling for bank-specific characteristics. The data indicate that tighter regulations on bank entry and bank activities boost the cost of financial intermediation. Inflation also exerts a robust, positive impact on bank margins and overhead costs. While concentration is positively associated with net interest margins, this relationship breaks down when controlling for regulatory impediments to competition and inflation. Furthermore, bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection, while these institutional indicators robustly explain cross-bank net interest margins and overhead expenditures. Thus, bank regulations cannot be viewed in isolation; they reflect broad, national approaches to private property and competition. ER -