Banks’ Noninterest Income and Systemic Risk
By Markus K. Brunnermeier, Gang Nathan Dong, Darius N Palia. The Review of Corporate Finance Studies, 2020
262 citations recorded by the source corpus.
This paper finds noninterest income is positively correlated with the total systemic risk for U.S. banks. Decomposing total systemic risk into three components, we find that noninterest income is positively related to a bank’s tail risk, positively related to a bank’s interconnectedness risk, and an insignificantly related to a bank’s exposure to macroeconomic and finance factors. We also find that noninterest income is more volatile and negatively related to interest income. Finally, we find trading and other noninterest income to be positively correlated with systemic risk. Other noninterest income, compared with trading income, has a slightly larger economic impact. (JEL G01, G18, G20, G21, G32, G38) Received October 31, 2019; editorial decision February 3, 2020 by Editor Andrew Ellul.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/bf5ce68340b8581741ae227972e56d5571babb73
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Citations in the corpus
- The emergence of the global fintech market: economic and technological determinants (2016, unknown): “Stringent financial regulation was the outcome of the spread of systemic risk to the financial system (Brunnermeier et al., 2012).”
- Why do some banks contribute more to global systemic risk? (2018, background): “Complementing the arguments of Brunnermeier et al. (2012), banks with a higher portion of deposit taking (and thus a less fragile funding) should contribute less to systemic risk than banks engaging more strongly in non-core banking activities.”