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THE RELATIONSHIP BETWEEN FEE INCOME AND NET INTEREST MARGIN AMONG US BANKS

Date created
2013-12-16
Authors/Contributors
Author: Li, Xiaoran
Author: An, Ran
Abstract
This paper examines the relationship between fee income and net interest margins of banks. We use a sample of banks in the US over the period 1986-2012, and combine the Panel VAR with the GMM method. We find that changes in fee income have no impact on changes in net interest margins. However, a decrease in net interest margins is followed by an increase in fee income in the subsequent year. This result is more pronounced for large banks after the passage of the Gramm-Leach-Bliley Act in 1999, which increased banks’ ability to generate fee income. We conclude that large banks can increase their fee income to offset the decrease in net interest margins.
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Copyright is held by the author(s).
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You are free to copy, distribute and transmit this work under the following conditions: You must give attribution to the work (but not in any way that suggests that the author endorses you or your use of the work); You may not use this work for commercial purposes.
Scholarly level
Peer reviewed?
No
Language
English
Download file Size
final version (Xiaoran LI and Ran An).pdf 1.07 MB

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