What types of banks profit most from fees charged? A cross-country examination of bank-specific and country-level determinants |
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| Institution: | 1. Department of Economics, University of the West Indies, Mona Campus, Jamaica;2. The World Bank, Poverty Reduction and Economic Management Unit, LAC, United States;1. Grenoble Ecole de Management, Department of Finance, 12 rue Pierre Sémard, 38003 Grenoble cedex 01, France;2. Department of Economics and Political Science at Vrije Universiteit Brussel (VUB), Belgium;1. Graduate School of Social Sciences, Tokyo Metropolitan University, 1-1 Minami-osawa, Hachioji, Tokyo 192-0397, Japan;2. Graduate School of Economics, Osaka University, 1-7 Machikaneyama, Toyonaka, Osaka 560-0043, Japan;3. Swiss Finance Institute, École Polytechnique Fédérale de Lausanne, 1015 Lausanne, Switzerland;1. Dipartimento di Studi Aziendali e Quantitativi, Università Parthenope, Via Generale Parisi 13, 80132 Napoli, Italy;2. Dipartimento di Studi Aziendali, Università degli Studi di Salerno, Via Ponte don Melillo, 84084 Fisciano (SA), Italy;3. Dipartimento di Scienze Aziendali, Università della Calabria, Via p. Bucci cubo 3C, 87036 Rende (CS), Italy |
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| Abstract: | 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. |
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| Keywords: | Banks Fees Profitability Market structure Macroeconomic volatility Culture |
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