Macro Stress Testing Euro Area Banks' Fees and Commissions

37 Pages Posted: 2 Mar 2017

See all articles by Christoffer Kok

Christoffer Kok

European Central Bank (ECB)

Harun Mirza

European Central Bank (ECB)

Cosimo Pancaro

European Central Bank (ECB)

Date Written: February 27, 2017

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 years 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 awed.

Keywords: fee and commission income, stress testing, scenario analysis

JEL Classification: G21, G17, G01

Suggested Citation

Kok, Christoffer and Mirza, Harun and Pancaro, Cosimo, Macro Stress Testing Euro Area Banks' Fees and Commissions (February 27, 2017). ECB Working Paper No. 2029. Available at SSRN: https://ssrn.com/abstract=2925750

Christoffer Kok (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Harun Mirza

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Cosimo Pancaro

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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