How did Covid-19 impact bank spreads across EU and Asia

What is it about?

We find that the impact in the case of Asia was a decrease in bank spreads while bank spreads were higher in the EU during covid-19. During the covid-19 crisis, the magnitudes of typical determinants increased for the case of South Asian banks. In the case, of EU banks the magnitude of bank spread determinants decreased. Evidence suggests an opportunity of arbitrage available to international banks to enter emerging markets and earn higher spreads. This would improve these countries' financial sectors, shrinking net interest margins and converging with those of developed countries.

Featured Image

Photo by bruno neurath-wilson on Unsplash

Photo by bruno neurath-wilson on Unsplash

Why is it important?

Evidence suggests that there is opportunity of arbitrage due to difference in spreads across EU and South Asia. Additionally, the bank response to COVID-19 was not the same across the developed and developing countries.