Credit and liquidity risk in the determination of spread over business cycles
by Eduardo Medeiros Rubik; Vinicius Amorim Sobreiro; Herbert Kimura
International Journal of Financial Innovation in Banking (IJFIB), Vol. 3, No. 1, 2021

Abstract: The difference between the amount paid to depositors and the amount charged from borrowers, defined as bank spread, is determined by several factors. Two of them, according to theoretical models, are credit risk and liquidity risk. In this context, we aim to analyse whether these factors change their influence on spread over different periods of business cycles. Brazilian banks were used to evaluate the behaviour of spread at various periods during business cycles by applying the modelling suggested by Aydemir and Guloglu (2017). However, the results show that the influence of credit risk and liquidity risk on the average conditional spread does not change at different periods over business cycles. Furthermore, credit risk and liquidity risk adversely affect spread, contradicting studies on the Brazilian economy, such as Almeida and Divino (2015). Finally, we conclude that spread is procyclical and has a high speed of adjustment.

Online publication date: Wed, 12-May-2021

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Financial Innovation in Banking (IJFIB):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email