Banks? Non-Traditional Activities Under Regulatory Changes: Impact on Risk, Performance and Capital Adequacy

Jean-Pierre Gueyié, Alaa Guidara and Van Son Lai

No 2018-003, Working Papers from Department of Research, Ipag Business School

Abstract: Using the big six Canadian chartered banks quarterly financial statements and daily stock market data from 1982 to 2018, we examine the impact of non-interest income on Canadian banks? risk, performance and capital under the different major regulatory changes made to the Bank Act of Canada. Our results show that Canadian banks? expansion into nontraditional activities had slightly decreased their risks and significantly improved their performance benefitting from income diversification. Moreover, while adhering to capital adequacy regulation, reshuffling banks? portfolio towards non-traditional activities did not reduce Canadian banks? capital ratio. In spite of the re-regulation towards universal banking against ring-fencing, this feature buttresses the effectiveness of capital adequacy regulation in Canada in linking banks capital allocation with their risk taking

Keywords: Non-interest income; Banking regulation; Risk exposure; Performance; Capital (search for similar items in EconPapers)
JEL-codes: C33 G21 G28 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018-01-01
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Journal Article: Banks’ non-traditional activities under regulatory changes: impact on risk, performance and capital adequacy (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ipg:wpaper:2018-003

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