The impact of non-interest income on bank risk in Australia

Barry Williams

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

Abstract

This paper considers the relationship between bank revenue composition and bank risk in Australia, using data drawn from Australian bank confidentialregulatory returns. It is found that those banks with lower levels of non interest income and higher revenue concentration are less risky, contrary tomean-variance portfolio theory but consistent with previous internationalevidence. Decreasing returns to scale in bank risk is found, with resultssuggesting that the major Australian banks have reached the scale point wheresize is risk increasing. Non interest income is found to be risk increasing, butsome evidence is found that trading and investment income may be riskreducing in certain circumstances, particularly when bank specialisationeffects are considered. It is also suggested that care must be taken whenselecting the appropriate peers for performance benchmarking, asinstitutionally based peer analysis is likely to be misleading unless bankspecialisation is considered.
Original languageEnglish
Title of host publication25th Australasian Finance & Banking Conference
Place of PublicationSydney
PublisherSocial Science Electronic Publishing
Pages1-33
Number of pages33
ISBN (Print)9780987312747
DOIs
Publication statusPublished - 2012
Externally publishedYes
Event25th Australasian Finance and Banking Conference 2012 - Sydney, Sydney, Australia
Duration: 16 Dec 201218 Dec 2012

Conference

Conference25th Australasian Finance and Banking Conference 2012
CountryAustralia
CitySydney
Period16/12/1218/12/12

Fingerprint

Non-interest income
Bank risk
Increasing risk
Revenue
Peers
Returns to scale
Income
Portfolio theory
Benchmarking
Bank relationships

Cite this

Williams, B. (2012). The impact of non-interest income on bank risk in Australia. In 25th Australasian Finance & Banking Conference (pp. 1-33). Sydney: Social Science Electronic Publishing. https://doi.org/10.2139/ssrn.2130959
Williams, Barry. / The impact of non-interest income on bank risk in Australia. 25th Australasian Finance & Banking Conference. Sydney : Social Science Electronic Publishing, 2012. pp. 1-33
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Williams, B 2012, The impact of non-interest income on bank risk in Australia. in 25th Australasian Finance & Banking Conference. Social Science Electronic Publishing, Sydney, pp. 1-33, 25th Australasian Finance and Banking Conference 2012, Sydney, Australia, 16/12/12. https://doi.org/10.2139/ssrn.2130959

The impact of non-interest income on bank risk in Australia. / Williams, Barry.

25th Australasian Finance & Banking Conference. Sydney : Social Science Electronic Publishing, 2012. p. 1-33.

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

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Williams B. The impact of non-interest income on bank risk in Australia. In 25th Australasian Finance & Banking Conference. Sydney: Social Science Electronic Publishing. 2012. p. 1-33 https://doi.org/10.2139/ssrn.2130959