Stress testing French banks' income subcomponents

J. Coffinet, S. Lin and C. Martin

Documents de Travail from Banque de France

Abstract: Using a broad dataset of individual consolidated data of French banks over the period 1993-2007, we seek to evaluate the sensitivity to adverse macroeconomic scenarios of the three main sources of banking income, namely interest margins, fees and commissions, and trading income. First, we show that the determinants of banking income subcomponents are highly specific: whereas interest rates spread plays a significant role in determining net interest income, stock market measures are significant determinants of trading income. GDP growth impacts significantly on fees and commissions. Second, our macroeconomic stress testing exercises tend to show that fees and commission and to a lesser extent trading incomes are much more sensitive to some adverse macroeconomic shocks than interest income. This could support the view that income diversification is associated with higher banking revenue resilience.

Keywords: Banking income; Interest margins; Fees and commissions; Trading income; Dynamic panel estimation. (search for similar items in EconPapers)
JEL-codes: C23 G21 L2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-rmg
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:bfr:banfra:242

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