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The effect of non-traditional banking activities on systemic risk: Does bank size matter?

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  • Fina Kamani, Eric
Abstract
This article analyses how the effects of non-traditional banking activities on banks’ exposures to systemic risk differ according to bank size. Through data on European banks, we use the generalized-method-of-moments while taking into account the unobservable common factors between banks. We find that non-traditional banking activities only increase small banks’ exposure to systemic risk; trading activities only increase small banks’ exposure to systemic risk; commissions and fees activities only increase large banks’ exposure to systemic risk. Thus, our findings call for the establishment of a European banking regulation similar to the Glass-Steagall Act for small banks.

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  • Fina Kamani, Eric, 2019. "The effect of non-traditional banking activities on systemic risk: Does bank size matter?," Finance Research Letters, Elsevier, vol. 30(C), pages 297-305.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:297-305
    DOI: 10.1016/j.frl.2018.10.013
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    More about this item

    Keywords

    Non-interest income; Bank size; Systemic risk;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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