The evolution of bank revenue and risk in the Asia-Pacific Region

Barry Williams and Gulasekaran Rajaguru

Pacific-Basin Finance Journal, 2022, vol. 71, issue C

Abstract: We model the simultaneous determination of bank non-interest income and net interest income while considering bank risk, capital holdings and regulatory quality. Declines in net-interest income are associated with increased non-interest income. In contrast, net interest income shows negligible sensitivity to changes in non-interest income. Increased non-interest income is associated with increased capital holdings after the GFC (with no evidence of volatility increasing regulatory arbitrage). Non-interest income is associated with worsening loan quality. Thus, bank conglomeration does not reduce information asymmetry in the loan portfolio. We establish that the Chinese banking system did not adjust its revenue mix in the same manner as other banks in our regional sample. We argue that increased non-interest income should result in increased prudential surveillance by national regulatory authorities, with a particular focus on loan quality.

Keywords: Asian banks; Non-interest income; Risk; Capital holdings; Panel vector autoregressions (search for similar items in EconPapers)
JEL-codes: C33 G21 G28 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X21002006
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:71:y:2022:i:c:s0927538x21002006

DOI: 10.1016/j.pacfin.2021.101693

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().