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The enigma of noninterest income convergence

Angelos Antzoulatos (), Ekaterini Panopoulou () and Chris Tsoumas ()

Applied Financial Economics, 2011, vol. 21, issue 17, 1309-1316

Abstract: Over the past quarter century, the great wave of financial liberalization, together with advances in information processing technology and finance theory, created severe competitive pressures on both the asset and liability sides of bank balance sheets and, on the positive side, allowed banks to offer more products and services. Responding strategically, banks shifted away from traditional intermediation activities to fee-earning and trading activities. Yet, as we document using the panel convergence methodology developed by Phillips and Sul (2007a), this shift exceeded what one could reasonably expect. Specifically, the share of Noninterest Income (NII) has been converging in the Organization for Economic Co-operation and Development (OECD) countries, providing a strong indication that the aforementioned common competitive pressures dominated the bank-specific and country-specific factors that affect the composition of bank income. Among the policy implications, the systemic risk on a global scale is likely to be greater than that indicated by bank-level and country-level analyses.

Keywords: noninterest income; banks; log t test; transition curves (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1080/09603107.2011.570712

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