loans and money

In the past payday lending rates in many markets were regulated and set by regulators or by banks operating in a cartel. The global trend has been towards liberalization and allowing market forces to set lending rates. In most OECD countries, and in increasing numbers of emerging markets, free competition determines lending rates. Competition has resulted in lower spreads (the difference between what banks pay for deposits and earn on loans) in most traditional lending segments including corporate.
Other banks may have different cost structures and strategic objectives. One bank may decide to attempt to gain market share by undercutting on price or be prepared to make unsecured loans. Decisions have to be made as to whether to accept a lower market share or respond by matching or undercutting the rates and terms offered by the bank initiating the price war. Price wars can be dangerous and what starts as an attempt by one bank to gain market share can result in unchanged market shares and lower yields on these loans than before for all banks.
The following diagram provides a summary of the major macro-level factors that have an influence on loan pricing and bank positioning.