Bank Loan Pricing in the Asia‐Pacific Region

Abstract

This study examines bank practices of corporate loan pricing in the Asia‐Pacific region. We find that the all‐in‐spread for loans (mostly term loans with longer maturities) in the Asia‐Pacific region are significantly smaller than those in the US. In addition, foreign banks tend to price their loans favorably in the Asia‐Pacific region, while foreign banks in the US have a higher loan spread. This finding indicates that foreign banks foster more competitive loan pricing in the Asia‐Pacific region, while foreign banks in the US seem to experience a competitive disadvantage compared to domestic lenders.

Off-Balance Sheet and Bank Behavior: Does Market Power Matter?

“…Research conducted by Soedarmono et al (2013) found that banks in Asia tend to take more significant risks and are vulnerable to moral hazards, mainly if banks operate in less competitive markets. Moreover, the loan distribution in Asia banks tends to have a smaller margin difference between the cost of funds and the lending rate (Chotigeat et al, 2008). Credit sales are made by offering lower interest rates.…”