Banks' Non-Interest Income and Systemic Risk

33 Pages Posted: 14 Feb 2019

See all articles by Markus K. Brunnermeier

Markus K. Brunnermeier

Princeton University - Department of Economics

G. Nathan Dong

Columbia University

Darius Palia

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics; Columbia University - Law School

Date Written: January 31, 2019

Abstract

This paper finds non-interest income to be positively correlated with total systemic risk for a large sample of U.S. banks. Decomposing total systemic risk into three components, we find that non-interest income has a positive relationship with a bank’s tail risk, a positive relationship with a bank’s interconnectedness risk, and an insignificant or positive relationship with a bank’s exposure to macroeconomic and finance factors. These results are generally robust to endogenizing for non-interest income and for trading and other non-interest income activities.

Keywords: Systemic Risk, Banks, Non-Interest Income, Risk-Spillover, Capital Requirements

JEL Classification: G01, G10, G18, G20, G28, G32, G38

Suggested Citation

Brunnermeier, Markus Konrad and Dong, Gang Nathan and Palia, Darius, Banks' Non-Interest Income and Systemic Risk (January 31, 2019). Available at SSRN: https://ssrn.com/abstract=3328890 or http://dx.doi.org/10.2139/ssrn.3328890

Markus Konrad Brunnermeier (Contact Author)

Princeton University - Department of Economics ( email )

Bendheim Center for Finance
Princeton, NJ
United States
609-258-4050 (Phone)
609-258-0771 (Fax)

HOME PAGE: http://www.princeton.edu/¡­markus

Gang Nathan Dong

Columbia University ( email )

722 W 168th Street
New York, NY 10032
United States

Darius Palia

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

111 Washington Street
MEC 134
Newark, NJ 07102
United States
973-353-5981 (Phone)
973-353-1233 (Fax)

Columbia University - Law School ( email )

435 W 116th St.
New York, NY 10027
United States

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