Banks' Non-Interest Income and Systemic Risk


Brunnermeier, Markus K., Gang Dong, and Darius Palia. “Banks' Non-Interest Income and Systemic Risk”. Review of Corporate Financial Studies 92 (2020): , 9, 2, 229-255. Web.


This paper finds non-interest income to be positively correlated with total systemic risk for a large sample of U.S. banks.  Decomposing total systemic risk into three components, we find that non-interest income has a positive relationship with a bank’s tail risk, a positive relationship with a bank’s interconnectedness risk, and an insignificant or positive relationship with a bank’s exposure to macroeconomic and finance factors. These results are generally robust to endogenizing for non-interest income and for trading and other non-interest income activities.

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See also: Systemic Risk
Last updated on 07/21/2020