Macro stress testing euro area banks’ fees and commissions

Christoffer Kok, Harun Mirza and Cosimo Pancaro

Journal of International Financial Markets, Institutions and Money, 2019, vol. 61, issue C, 97-119

Abstract: This paper uses panel econometric techniques to estimate a macro-financial model for fee and commission income over total assets for a broad sample of euro area banks. Using the estimated parameters, it conducts a scenario analysis projecting the fee and commission income ratio over a three-year horizon conditional on the baseline and adverse macroeconomic scenarios used in the 2016 EU-wide stress test. The results indicate that the fee and commission income ratio is varying in particular with changes in its own lag, the short-term interest rate, stock market returns and real GDP growth. They also show that the fee and commission income ratio projections are more conservative under the adverse scenario than under the baseline scenario. These findings suggest that stress tests assuming scenario-independent fee and commission income projections are likely to be flawed.

Keywords: Fee and commission income; Stress testing; Scenario analysis (search for similar items in EconPapers)
JEL-codes: G01 G17 G21 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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Working Paper: Macro stress testing euro area banks' fees and commissions (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:61:y:2019:i:c:p:97-119

DOI: 10.1016/j.intfin.2019.02.005

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