The impact of economic policy uncertainty on banks' non-interest income activities

Whelsy Boungou (1) , Charles Mawusi (2)

1 Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales
2 BSE - Bordeaux Sciences Economiques

This paper investigates how banks adjust their business model amid rising global economic uncertainty. Specifically, we analyze the effect of economic policy uncertainty (EPU) on banks' non-interest income activities, using a large panel dataset of 3913 banks operating in 9 countries over the period 2009–2018. We find no statistically significant effect of EPU on banks’ net non-interest income (NNII). Further analysis shows that the lack of impact on NNII is due to a reduction in gross non-interest income which was offset by a decrease in gross non-interest expenses. Our results also suggest that the likelihood of banks to diversify income amid high EPU is conditional on the negative interest rate environment.

Mots clés: Economic policy uncertainty; Bank diversification; Negative interest rate environment

Domaines: Economies et finances

Whelsy Boungou, Charles Mawusi. The impact of economic policy uncertainty on banks' non-interest income activities. International Economics, 2022, 169, pp.89-97. ⟨10.1016/j.inteco.2021.12.003⟩. ⟨hal-03520683⟩