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Macro stress testing euro area banks' fees and commissions

Author

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  • Kok, Christoffer
  • Pancaro, Cosimo
  • Mirza, Harun

Abstract

This paper uses panel econometric techniques to estimate a macro- nancial 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 macro-economic 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 flawed. JEL Classification: G21, G17, G01

Suggested Citation

  • Kok, Christoffer & Pancaro, Cosimo & Mirza, Harun, 2017. "Macro stress testing euro area banks' fees and commissions," Working Paper Series 2029, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20172029
    Note: 508948
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    References listed on IDEAS

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    Cited by:

    1. Marcin Borsuk, 2019. "Forecasting the Net Interest Margin and Loan Loss Provision Ratio of Banks in Various Economic Scenarios: Evidence from Poland," Russian Journal of Money and Finance, Bank of Russia, vol. 78(1), pages 89-106, March.
    2. Danilo Liberati & Francesco Vercelli, 2019. "As long as the bank gains: expanding the retail distribution activity," Questioni di Economia e Finanza (Occasional Papers) 510, Bank of Italy, Economic Research and International Relations Area.
    3. Budnik, Katarzyna & Balatti, Mirco & Dimitrov, Ivan & Groß, Johannes & Kleemann, Michael & Reichenbachas, Tomas & Sanna, Francesco & Sarychev, Andrei & Siņenko, Nadežda & Volk, Matjaz, 2020. "Banking euro area stress test model," Working Paper Series 2469, European Central Bank.

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    More about this item

    Keywords

    Fee and commission income; scenario analysis; stress testing;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G01 - Financial Economics - - General - - - Financial Crises

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