Banks' noninterest income and systemic risk

Markus K. Brunnermeier, Gang Nathan Dong, Darius Palia

Research output: Contribution to journalArticlepeer-review

78 Scopus citations


This paper finds noninterest income is positively correlated with the total systemic risk for U.S. banks. Decomposing total systemic risk into three components, we find that noninterest income is positively related to a bank's tail risk, positively related to a bank's interconnectedness risk, and an insignificantly related to a bank's exposure to macroeconomic and finance factors. We also find that noninterest income is more volatile and negatively related to interest income. Finally, we find trading and other noninterest income to be positively correlated with systemic risk. Other noninterest income, compared with trading income, has a slightly larger economic impact. (JEL G01, G18, G20, G21, G32, G38) Received October 31, 2019; editorial decision February 3, 2020 by Editor Andrew Ellul.

Original languageEnglish (US)
Pages (from-to)229-255
Number of pages27
JournalReview of Corporate Finance Studies
Issue number2
StatePublished - Aug 1 2020

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Finance
  • Economics and Econometrics


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