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Determinants of Bank Fee Income in the EU Banking Industry - Does Market Concentration Matter?

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  • Karolína Vozková
  • Petr Teplý

Abstract

In this paper, we analyse the key determinants of bank fee and commission income in the European Union with a special emphasis on market concentration. On a sample of 258 EU banks during the 2007-2014 period, we apply System Generalized Method of Moments. First, we argue that the banks facing higher competition tend to expand more aggressively into non-traditional activities, and therefore they report a higher share of fee income in total income. Second, we found that a higher equity to assets ratio is related with higher shares of fee income since the bank needs more capital to prevent or manage the potential risks of the non-traditional activities. Finally, a high deposits to assets ratio tends to increase the fee income share, which may be possibly attributed to relatively high switching costs and to close depositor-bank relationship in the EU banks.

Suggested Citation

  • Karolína Vozková & Petr Teplý, 2018. "Determinants of Bank Fee Income in the EU Banking Industry - Does Market Concentration Matter?," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(1), pages 3-20.
    • Handle: RePEc:prg:jnlpep:v:2018:y:2018:i:1:id:645:p:3-20
    DOI: 10.18267/j.pep.645
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    Cited by:

    1. Karel Janda & Oleg Kravtsov, 2020. "Banking Supervision and Risk-Adjusted Performance inthe Host Country Environment," FFA Working Papers 3.001, Prague University of Economics and Business, revised 19 Nov 2020.
    2. Faisal Abbas & Shoaib Ali, 2022. "Dynamics of diversification and banks' risk‐taking and stability: Empirical analysis of commercial banks," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(4), pages 1000-1014, June.
    3. Rashedul Hasan & Mohammad Dulal Miah & M. Kabir Hassan, 2022. "The nexus between environmental and financial performance: Evidence from gulf cooperative council banks," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 2882-2907, November.

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    More about this item

    Keywords

    bank; fee and commission income; Generalized Method of Moments; Herfindahl index; market concentration;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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