(Finance) – In the Italian banking system the ratio of fees to total assets is the highest among the major euro area countries, and is grown almost steadily since 2008. The level of commissions charged by banks to their customers is not a variable subject to regulation, but its weight and its evolution over time “can signal both risks for the sustainability of the banks’ business models and frictions in the correctness of relations with customers“. This can be read in the research “Banking commissions, between trends and business models” by the Bank of Italy.
According to the study by the economists of via Nazionale, the increase in commission income has involved all categories of banks, but the share of fee income and the use of fee types is very heterogeneous across banks. For example, significant cooperative banks have on average lower ratios between total fees and total assets, but higher ratios between payment order, payment card and account management fees.
Research results show that higher fees are associated with higher operating expenses and lower capital levels. These results are generally stable over time, bank categories and commission types. “The estimates do not imply a causal link between the variables – it is emphasized – however, they suggest that higher fee income requires or is obtained when the cost structure is more cumbersome and that the dependence on fee income is more pronounced for banks with lower capital levels“.
Furthermore, the results show that there is no stable relationship between fees and net interest income at the banking level, which suggests that the increase in fees after the global financial crisis is not simply and entirely due to the decline in lending profits caused by the prolonged period of low interest rates.
More generally, the banks more specialized in the traditional lending activity appear to use commissions less as a source of income than the banks specialized in the investment activity. Indeed, Bankitalia’s analysis suggests that banks whose business models are more focused on loans to households they have less likely to rely on fees and they don’t appear to be leveraging loans to broaden the scope of fees.