Effect of macroprudential instruments on the composition of bank revenue

This study investigates the effect of the implementation of restrictive macroprudential policies on bank revenue composition. Specifically, we analyze changes in the ratio of non-interest income to bank revenue, where bank revenue is defined as the sum of interest income and non-interest income. To do so, we estimate fixed-effects panel regressions using quarterly data from 557 banks across 27 countries, including both emerging and developed economies, covering the period from 2010 to 2021. Our results indicate that the implementation of macroprudential policies increases the share of non-interest income in the composition of banks' revenue, particularly through restrictions on foreign currency lending (LFC) and foreign exchange exposure (LFX). These results highlight the potential effects of macroprudential instruments on bank profitability and revenue composition, which financial regulators should take into account when designing policies to enhance financial stability.