The impact of non-interest income on bank risk in Australia

Research output: Contribution to journalArticleResearchpeer-review

21 Citations (Scopus)

Abstract

The relationship between bank revenue composition and bank risk in Australia is modeled using data drawn from Australian bank confidential regulatory returns. It is found that those banks with lower levels of non-interest income and higher revenue concentration are less risky, consistent with previous international evidence. Evidence is also found supportive of increased risk due to too-big-to-fail effects, with this risk increase being offset by a decline in large bank risk after the crisis of 2007–2008. Non-interest income is generally found to be risk increasing, but some types of non-interest income are risk reducing when bank specialization effects are considered. It is also found that the 2008 financial crisis changed some aspects of the relationship between bank risk and revenue composition.
Original languageEnglish
Pages (from-to)16-37
Number of pages22
JournalJournal of Banking and Finance
Volume73
DOIs
Publication statusPublished - 2016

Keywords

  • Bank risk
  • Non-interest risk
  • Interval value at risk

Cite this

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title = "The impact of non-interest income on bank risk in Australia",
abstract = "The relationship between bank revenue composition and bank risk in Australia is modeled using data drawn from Australian bank confidential regulatory returns. It is found that those banks with lower levels of non-interest income and higher revenue concentration are less risky, consistent with previous international evidence. Evidence is also found supportive of increased risk due to too-big-to-fail effects, with this risk increase being offset by a decline in large bank risk after the crisis of 2007–2008. Non-interest income is generally found to be risk increasing, but some types of non-interest income are risk reducing when bank specialization effects are considered. It is also found that the 2008 financial crisis changed some aspects of the relationship between bank risk and revenue composition.",
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The impact of non-interest income on bank risk in Australia. / Williams, Barry.

In: Journal of Banking and Finance, Vol. 73, 2016, p. 16-37.

Research output: Contribution to journalArticleResearchpeer-review

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AB - The relationship between bank revenue composition and bank risk in Australia is modeled using data drawn from Australian bank confidential regulatory returns. It is found that those banks with lower levels of non-interest income and higher revenue concentration are less risky, consistent with previous international evidence. Evidence is also found supportive of increased risk due to too-big-to-fail effects, with this risk increase being offset by a decline in large bank risk after the crisis of 2007–2008. Non-interest income is generally found to be risk increasing, but some types of non-interest income are risk reducing when bank specialization effects are considered. It is also found that the 2008 financial crisis changed some aspects of the relationship between bank risk and revenue composition.

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