Retail deposit fees and multimarket banking

This paper reports a systematic examination of the determinants of deposit-related retail banking fees using a set of survey data that is unusual for its size, specificity, and sampling properties. The analysis focuses explicitly on six different fees associated with checking accounts and automated teller machine (ATM) usage. A preliminary analysis documents that, on average, multimarket banks charge substantially higher fees than do typically smaller, single-market banks. A more detailed econometric analysis yields results consistent with predictions of recent models. In particular, it finds that the greater the presence of multimarket banks in the local market, the higher are the retail deposit fees of single-market banks (except in highly concentrated markets) and the weaker is the positive relationship between those fees and market concentration.     

美国银行业账户管理费实证研究

本文分析美国不同规模银行账户管理费的定价差异和规律,在基于统计数据的基础上发现:对于支票账户,大银行、小银行支票账户余额要求与账户管理费水平之间呈正相关关系,大银行采取的是"低起点、高余额、高账户管理费"的定价策略,而小银行采取的是"高起点、低余额、低账户管理费"的定价策略;对于储蓄账户,大银行储蓄账户开户起点与账户管理费、资产规模之间呈正相关关系,而小银行呈负相关关系,大银行采取的是"低起点、低利率、高余额、低账户管理费"定价策略,小银行采取的是"高起点、高利率、低余额、高账户管理费"定价策略.美国银行业账户管理费的做法对我国银行业的经营实践具有一定的借鉴意义.     

Determinants of information technology investments: The case of ATM in an emerging economy

This paper examines the determinants of automatic teller machine (ATM), a kind of information technology (IT), in the Taiwanese banking industry. The lessons learned from Taiwan's banking industry can be applied to China's banking industry to facilitate the understanding of the IT adoption strategies of Chinese financial institutions. Factors that are expected to have impact on IT investment in general and on ATM investment in particular are identified from three perspectives, namely operating scale perspective, deposit service perspective, and operating cost perspective. The results of this study indicate that operating scale, banking deposit service and operating cost are all significant determinants of ATM investment in the Taiwan banking industry. The results are useful for those banks and financial institutions outside of China in deciding their ATM investment strategies in China when trying to enter and penetrate the Chinese banking market.     

Banks' noninterest income and securities holdings in a low interest rate environment: The case of Italy

Using a sample of 440 Italian banks over the period 2007–2016, we find that low interest rates motivate banks to expand their fee and commission income and to restructure their securities portfolios. A granular breakdown suggests that banks grow noninterest income in various ways, including portfolio management, brokerage and consultancy services and increase fee income from current account and payment services. In addition, banks rebalance securities portfolios away from those “held for trading” to securities “available for sale” and “held to maturity.” Our findings allude to different behavior between large and small banks: while larger banks increase brokerage, consultancy and portfolio management services, smaller banks generate fees from customer current accounts.     

ATM foreign fees and cash withdrawals

We evaluate the impact of “foreign” fees paid by consumers on their cash withdrawals at automatic teller machines (henceforth ATMs). These so called foreign fees are paid when consumers withdraw cash from ATMs which are not owned by their home bank. We take advantage of a natural experiment whereby (non linear) foreign ATM fees in one specific bank became suddenly applicable at one point in time. We also use this experiment to evaluate the substitutions between foreign ATM withdrawals and other home ATM or desk withdrawals as well as with payments by card. Using panel data on accounts, we first estimate average treatment effects on the treated before carrying on with the estimation of a simple structural model. The latter procedure allows us to compute the counterfactual impacts of changing the schedule of foreign fees. Impacts are sizeable on bank profits and consumer welfare.     

Assessing the FDIC's premium and examination policies using ‘Soviet’ put options

The FDIC's total liability for insuring a bank's deposits during a fixed period diminishes as the frequency of examinations increases, since a marginally solvent bank can be closed while losses are small. The paper develops a technique for pricing the insurance liability over a fixed period during which there are multiple examinations. Under current policy most banks are examined annually and reviewed every six months, at which time the fees for insurance may be adjusted. Since the current schedule of fees allows only a narrow range and a few discrete levels, the FDIC typically retains some positive or negative residual liability in each six-month period and for the entire year. We show how to estimate this net liability. The calculations of total and net liability are illustrated for a sample of large banks.     

The competitive implications of multimarket bank branching

Retail banking markets have traditionally been viewed as locally limited. However, recent studies have found evidence that large multimarket banking organizations tend to offer uniform interest rates for retail deposit accounts throughout the area that they serve, at least within a given state. This uniform pricing phenomenon raises questions about the continued relevance of the concept of local banking markets for both research and antitrust purposes.We address this issue by employing a model designed to explain the pricing behavior of single-market banks that face competition from multimarket banks. Empirical results are found to be consistent with the many implications of the model. We find that even with multimarket banks present in the market, local market concentration influences the pricing behavior of single-market banks; however, this relationship weakens as the market share of multimarket banks grows. We also find that, on average, multimarket banks offer lower deposit interest rates than do single-market banks operating in the same market, and, in most cases, greater multimarket bank presence is associated with lower deposit interest rates offered by single-market banks.     

Bank stability and the price of loan commitments

Firms insure themselves from liquidity shocks by contracting on credit lines from banks. I document novel empirical evidence on how the risk of contract nonperformance by banks is priced. Firms pay a higher price for loan commitments from safer banks. A one standard deviation increase in the cross-sectional mean of bank capital increases the commitment fees by 5%. To investigate a potential causal effect of lender stability on commitment fees, I exploit exogenous variation in the market value of banks’ assets from natural disasters. The sensitivity of the fees is higher for firms with higher short-term liabilities and higher income uncertainty.     

刷卡手续费之争的博弈分析及银行对策研究

近期深圳零售企业与银联之间的刷卡费率之争甚为激烈.作者通过对国外相似案例的比较和对影响银商博弈因素的分析,认为:银行卡垄断的行业特征并非银商之战的真正原因;商家利润率的下滑是引起银商之争的主要原因,刷卡消费比例的提高和信息不对称是矛盾产生的次要因素;原有的"银行收取高手续费、商家采取合作态度"的博弈均衡正在被打破,银行做出适当调整势在必行;商家应认清银行卡发展乃是大势所趋,反思自身利润下降的原因,而不因一味指责银行卡垄断;银行应从Wal-Mart案中汲取经验教训,注重调查研究,积极引导消费者用卡,并尽量争取政府支持,以期在谈判桌上取得主动.     

Which Factors Affect Bond Underwriting Fees? The Role of Banking Relationships

The question of which factors are relevant in determining bond underwriting fees is empirically investigated by analysing 2,202 bond issues completed by European firms during the 1993 – 2003 period. Four major results emerge from the analysis. First, the introduction of the single currency in 1999 has generated an increase in competition among banks, and, as a result, a reduction in underwriting fees. Second, a strong relationship with the issuer's main bank reduces the level of underwriting fees. Third, new issuers are charged with lower underwriter fees relative to firms that have completed issues without building any strong relationship with a bank. Fourth, higher reputation banks charge lower underwriting fees. The implications of these findings are also discussed.     

ATM surcharge bans and bank market structure: The case of Iowa and its neighbors

It is frequently claimed that high ATM surcharges actually attract customers to the banks that impose them, particularly if they operate large ATM networks. By exploiting as “natural experiments” two events associated with the lifting of surcharge bans in Iowa and in the states that neighbor Iowa, this paper seeks to test for the implications of this phenomenon as it applies to the market shares of banking institutions and to several aspects of market structure. Consistent with predictions, results of “difference-in-difference” analyses suggest that the retail account shares of larger market participants increased relative to those of smaller competitors, market concentration increased, and the number of market competitors decreased after the lifting of surcharge bans – all relative to what would have occurred had there been no change in authority to surcharge.     

What types of banks profit most from fees charged? A cross-country examination of bank-specific and country-level determinants

The perception that banks are exploiting customers through their fee-charging practices in a bid to maximize profits, has fuelled widespread public interest in identifying the banks that profit most heavily from fees. Using hierarchical cross-country regression analyses, this paper seeks to answer the question – what types of banks profit most from fees charged? It also highlights the country level factors that influence banks’ ability to profit from fees charged. The factors at the country level distinguish between those that relate specifically to the financial services industry and broader macroeconomic indicators. The paper also identifies three channels through which national culture impacts banks’ ability to make high profits from fees. This paper uses the most comprehensive set of explanatory variables in studies of this nature. It has also extended the spatial scope of previous studies on bank fees by including data on banks from 46 developed and developing countries. In light of swelling public pressure on governments to do ‘something’ about bank fees, ill-advised measures are highlighted.     

The effects of big-bank presence on the profit efficiency of small banks in rural markets

Because big banks could impact competition in rural markets, we investigate the effects of big-bank presence on the performance of rural, small banks. When competing against a big bank, rural one-county banks operate at lower levels of proit efficiency, but with higher ROA and increased levels of interest and fee income from loans. Lower profit efficiency and higher returns in the rural markets suggest that big banks possess market power in rural markets and that they can extract rents to earn higher returns with lower than average profit efficiency. Therefore, small banks in rural markets should not fear large competitors. Conversely, customers who rely on loans from rural, small banks are negatively impacted by higher rates and fees on loans when a big bank is present in the market.     

Is there a relation between audit fee cuts during the global financial crisis and banks’ financial reporting quality?

As a result of the global financial crisis (GFC), several audit clients were able to negotiate lower audit fees for the years 2008 and 2009. However, the PCAOB has expressed concern that lower audit fees might lead to lower audit effort and lower audit quality and financial reporting quality. This study examines the relation between audit fee cuts and banks’ financial reporting quality. Specifically, we focus on earnings management via loan loss provisions (LLP), the relation between current period LLP and future loan charge-offs, i.e., LLP validity, and the timely recognition of loan losses. For banks audited by Big 4 auditors, we find that income-increasing abnormal LLP are decreasing in audit fee cuts and LLP validity is increasing in audit fee cuts. For banks audited by non-Big 4 auditors, LLP validity is higher for banks that received a fee cut of more than 25% relative to other banks audited by non-Big 4 auditors. We do not observe an association between timely loan loss recognition and cuts in audit fees except for banks audited by non-Big 4 auditors and exempt from internal control audits where a fee cut of more than 25% is associated with less timely loan loss recognition. Overall, the findings suggest that Big 4 auditors constrained earnings management via LLP in banks that received cuts in audit fees. Our findings have important implications for regulators, investors, and others.     

The pricing of deposit insurance in the presence of systematic risk

Based on the Merton (1977) put option framework, we develop a deposit insurance pricing model that incorporates asset correlations, a measurement for the systematic risk of a bank, to account for the risk of joint bank failures. Estimates from our model suggest that actuarially fair risk-based deposit insurance that considers only individual bank failure risk is underpriced, leaving insurance providers exposed to net losses. Our estimates also capture the size premium where big banks are priced with higher deposit insurance than small banks. This result is particularly relevant to the current regulatory concerns on big banks that are too-big-to-fail. Above all, our approach provides a unifying framework for integrating risk-based deposit insurance with risk-based Basel capital requirements.     

The pernicious effects of contaminated data in risk management

Banks hold capital to guard against unexpected surges in losses and long freezes in financial markets. The minimum level of capital is set by banking regulators as a function of the banks’ own estimates of their risk exposures. As a result, a great challenge for both banks and regulators is to validate internal risk models. We show that a large fraction of US and international banks uses contaminated data when testing their models. In particular, most banks validate their market risk model using profit-and-loss (P/L) data that include fees and commissions and intraday trading revenues. This practice is inconsistent with the definition of the employed market risk measure. Using both bank data and simulations, we find that data contamination has dramatic implications for model validation and can lead to the acceptance of misspecified risk models. Moreover, our estimates suggest that the use of contaminated data can significantly reduce (market-risk induced) regulatory capital.     

存款保险制度能否抑制银行个体风险承担?

基于2008-2019年我国30家上市银行的财务数据,研究了存款保险制度实施对银行风险承担行为的影响.对选取的经济变量进行单位根检验发现,变量均为平稳变量.利用固定效应模型进行实证回归分析,结果表明:总体上看,存款保险制度的推出增加了银行的风险承担行为;在将银行进行分类后,存款保险制度的实施对大型商业银行的风险承担影响...     

A Crisis of Banks as Liquidity Providers

Can banks maintain their advantage as liquidity providers when exposed to a financial crisis? While banks honored credit lines drawn by firms during the 2007 to 2009 crisis, this liquidity provision was only possible because of explicit, large support from the government and government‐sponsored agencies. At the onset of the crisis, aggregate deposit inflows into banks weakened and their loan‐to‐deposit shortfalls widened. These patterns were pronounced at banks with greater undrawn commitments. Such banks sought to attract deposits by offering higher rates, but the resulting private funding was insufficient to cover shortfalls and they reduced new credit.     

Audit Quality and the Market Valuation of Banks’ Allowance for Loan Losses*

The recent banking crisis has led market participants to focus on the adequacy and quality of banks’ balance sheet items such as the allowance for loan losses. Beaver and Engel (1996) document that the capital market prices the nondiscretionary component of loan loss allowance negatively and the discretionary component less negatively. Using data from the pre‐crisis period and three measures of audit quality, auditor type (i.e., Big 5 versus non–Big 5), auditor industry specialization/expertise, and audit and nonaudit fees paid to auditors, we examine the effect of audit quality on the market valuation of the discretionary component of the allowance for loan losses. We find that, relative to the nondiscretionary component, the market valuation of the discretionary component of loan loss allowance is higher for banks audited by Big 5 auditors than for banks audited by non–Big 5 auditors. We also find that the relative market valuation of the discretionary component of loan loss allowance is increasing in auditor expertise. Regarding the impact of fees paid to auditors, we find that banks paying higher audit fees have higher relative market valuation of the discretionary component of the allowance for loan losses, but banks that pay higher nonaudit fees do not.     

Do Firms Use M&A Business to Pay for Analyst Coverage?

We find that acquirers in merger and acquisition (M&A) transactions are more likely to hire as advisors investment banks that provided analyst coverage for the acquirer prior to the transaction. We also find that compared to a matched control group of banks, the advisor banks are less likely to terminate and more likely to initiate analyst coverage of the acquirer after the transaction. Finally, the advisor banks that initiate coverage after the transaction collect higher fees. These findings suggest that firms value analyst coverage and use M&A advisor appointments and advisor fees to compensate for it.