Seminario académico de Finanzas y Contabilidad

10 de enero, 13:00 horas, sala P304, Facultad de Economía y Negocios

Título: Does the Presence of Credit Unions Lower Interest Rates? Evidence from the Brazilian Credit Market

Expositor: Fabio Motoki de Fucape Business School, Brasil


We measure what happens to personal credit interest rates charged by banks when a credit union starts operating in a location. Competition and concentration of the Brazilian banking industry has been a long standing issue in the banking literature, and for the Brazilian Central Bank (BCB), the banks themselves, and market participants. This issue is of special interest in a country with one of the highest loan interest rates in the world. Using BCB’s Credit Information System we gather 377,029 location-month observations from 6,214 distinct locations and estimate a diff-in-diff double fixed-effects panel of determinants of the average annual percentage rate (APR) of bank credit operations. Results indicate that when a credit union enters a location, bank APRs drop between 2.2 p.p. and 5.9 p.p. relative to the control group, while more credit union market share is related to an increase of bank APRs (1 SD increase in market share related to an increase between 1.7 p.p. and 2.7 p. p in bank APRs). We contribute to the ongoing debate by providing evidence that the BCB must consider both concentration and competition when designing policies, since these two factors seem to affect APRs in a different manner.