Bank Profitability and the Business Cycle

39 Pages Posted: 6 Oct 2006

See all articles by Ugo Albertazzi

Ugo Albertazzi

ECB -DG Monetary Policy

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

Date Written: September 2006

Abstract

An important element of the macro-prudential analysis is the study of the link between business cycle fluctuations and banking sector profitability and how this link is affected by institutional and structural characteristics. This work estimates a set of equations for net interest income, non-interest income, operating costs, provisions, and profit before taxes, for banks in the main industrialized countries and evaluates the effects on banking profitability of shocks to both macroeconomic and financial factors. Distinguishing mainly the euro area from Anglo-Saxon countries, the analysis also identifies differences in the resilience of the respective banking systems and relates them to the characteristics of their financial structure.

Keywords: bank profitability, economic cycle, macro-prudential analysis

JEL Classification: C53, G21

Suggested Citation

Albertazzi, Ugo and Gambacorta, Leonardo, Bank Profitability and the Business Cycle (September 2006). Bank of Italy Economic Research Paper No. 601. Available at SSRN: https://ssrn.com/abstract=935026 or http://dx.doi.org/10.2139/ssrn.935026

Ugo Albertazzi (Contact Author)

ECB -DG Monetary Policy ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Leonardo Gambacorta

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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