An Analysis of Bank Fee and Commission Income in the EU and in the Czech Republic in a Low Interest Rate Environment
Abstract
This paper deals with the European banking sector fee and commission income, with a special emphasis on the Czech Republic, in the 2007-2018 period. During this time span, net interest income was declining due to low nominal growth and a long period of low interest rates.
We contribute to the literature when comparing the magnitude of fee income across the EU banking sectors. We come to the following key findings.
First, we conclude that there is no single optimal fee income strategy. Second, we argue that Czech banks are not abnormally dependent on fee income and their outstanding profitability is rather connected with sound risk management as well as with sufficient liquidity and capital buffers.
Third, we find that in the EU, fee income share followed an increasing trend after the 2007-2009 global financial crisis which might be connected with an effort to maintain desired profitability in a low interest rate environment.