BANKS NON-TRADITIONAL ACTIVITIES UNDER REGULATORY CHANGES:

IMPACT ON RISK, PERFORMANCE AND CAPITAL ADEQUACY

Alaa Guidaraa1, Jean-Pierre Gueyib, Van Son Laia, Issouf Soumara

This version: August 2014

ABSTRACT
Using the big six Canadian chartered banks quarterly financial statements and daily stock
market data from 1982 to 2010, we examine the impact of non-interest income on Canadian banks
risk, performance and capital under the different major regulatory changes made to the Bank Act of
Canada. We document a significant increasing trend in non-interest income with a substitution effect
between non-interest income and net interest margin following the 1987 amendment to the Bank Act
allowing commercial banks to acquire (or merge with) investment dealers and brokerage firms. Our
results show that Canadian banks expansion into non-traditional activities had resulted into decreased
risk and increased performance benefitting from income diversification. Moreover, while adhering to
capital adequacy regulation, reshuffling banks portfolio towards non-traditional activities did not
reduce Canadian banks capital ratio, buttressing the effectiveness of capital adequacy regulation in
Canada in linking banks capital allocation with their risk taking in spite of the re-regulation towards
universal banking.

Department of Finance, Insurance and Real Estate, Faculty of Business Administration, Laval University,
Quebec, Canada. Emails: (A. Guidara) alaa.guidara@fsa.ulaval.ca, (VS. Lai) vanson.lai@fas.ulaval.ca, (I.
Soumar) issouf.soumare@fsa.ulaval.ca.
b
Department of Finance, School of Management, University of Quebec in Montreal, Quebec, Canada. Email:
(JP. Gueyi) gueyie.jean-pierre@uqam.ca
1
Corresponding author. We thank participants at 2014 annual meeting of the Northern Finance Association in
Ottawa, Canada, the 2014 International Conference of the Financial Engineering and Banking Society, the
Centre for Money, Banking and Institutions (University of Surrey) and the Center for Research in Contemporary
Finance (Fordham University), Surrey, Fordham, UK, July 2014, the 51st annual meeting of Canadian Society of
Economic Sciences (SCSE) in Sherbrook, the Mathematical Finance Days 2012 in Montreal, the 10th annual
conference of interuniversity's center of research in risks, economic politics and employment (CIRPEE) in Sainte
Adle and the 45th annual conference of the Canadian Economic Association (CEA) at the University of Ottawa
in Canada, for their useful comments. We also thank the Social Sciences and Humanities Research Council of
Canada (SSHRC), the Quebecor Fund of Research in Societies and Cultures (FQRSC), the Financial Market
Authority - Quebec, the Fonds Conrad Leblanc, and the Institute of Mathematical Finance (IFM2) for their
financial supports. All errors and omissions are the authors sole responsibilities.

Electronic copy available at: http://ssrn.com/abstract=2547839

BANKS NON-TRADITIONAL ACTIVITIES UNDER REGULATORY CHANGES:

IMPACT ON RISK, PERFORMANCE AND CAPITAL ADEQUACY

ABSTRACT
Using the big six Canadian chartered banks quarterly financial statements and daily
stock market data from 1982 to 2010, we examine the impact of non-interest income on
Canadian banks risk, performance and capital under the different major regulatory changes
made to the Bank Act of Canada. We document a significant increasing trend in non-interest
income with a substitution effect between non-interest income and net interest margin
following the 1987 amendment to the Bank Act allowing commercial banks to acquire (or
merge with) investment dealers and brokerage firms. Our results show that Canadian banks
expansion into non-traditional activities had resulted into decreased risk and increased
performance benefitting from income diversification. Moreover, while adhering to capital
adequacy regulation, reshuffling banks portfolio towards non-traditional activities did not
reduce Canadian banks capital ratio, buttressing the effectiveness of capital adequacy
regulation in Canada in linking banks capital allocation with their risk taking in spite of the
re-regulation towards universal banking.

JEL classification: G21, G28, C33

Keywords: Non-interest income, Banking regulation, Risk exposure, Performance, Capital.

2
Electronic copy available at: http://ssrn.com/abstract=2547839

1. INTRODUCTION
The mounting competition from capital markets and shadow banking has widely been
identified as one of the major factors allowed bank to expand on non-traditional activities
(bank's business generating non-interest income). For instance, securitization which is
traditionally considered as investment banks business, have transformed some of the interestearning credit activities into fee-earning and trading activities. Some commentators attribute
the rise in non-traditional banking activities, to be one of the driving causes behind the recent
subprime credit crisis. Therefore, in the backdrop of spiralling financial innovation and
increased competition, many proposals advent to restrict activities of too-big-to-fail banks.
For example, Basel III increases risk-weights and capital requirements for trading assets and
off-balance sheet securitizations, the USA adopts the Volcker rule to restrict some banking
activities (e.g. proprietary trading), the UK adopts Vickers proposal for ring-fencing deposits,
and so forth. On the ongoing debate in the USA on the reinstatement of GlassSteagall Act
(separation of commercial banks and securities firms), one may suspect on the nature of the
dynamics between interest income and non-interest income and its impact on banks behavior.
The purpose of this paper is thus to study the impact of non-interest income on Canadian
banks risk, performance and capital under different regulatory changes. More specifically,
we address the following four research questions: (1) what type of relationship exists between
non-interest income and interest income activities (substitutes or complements)? (2) What is
the overall impact of non-traditional activities on Canadian banks risk exposure, and
following each Bank Act amendment? (3) What is the impact of non-traditional activities on
the capital level of Canadian chartered banks overall, and under main banking regulatory
changes? (4) Has the shifting into non-traditional activities had a beneficial effect on
Canadian banks performance?
By regulatory changes, we consider those regarding the Bank Act of Canada. Enacted
in 1871, this later is reckoned as the main bank financial regulation in Canada. Due to global
convergence and harmonization, various amendments to the Bank Act were highly
synchronized with the technical guidelines of the Basel Accords, first passed in 1987.
Significant amendments to the Canadian Bank Act were made following these accords (1987,
1992, 1997 and thereafter). The amendment to the Bank Act in 1987 which allowed in
particular commercial banks to conduct investment banking activities has generated a series

of mergers and acquisitions of investment dealers and brokerage firms by commercial banks.1
In 1988, Basel regulation has introduced credit risk and by 1992 Canadian banks were
supposed to account for this risk in their risk-weighed-assets computation. Allen (2003)
stipulated that 1992 was the year of full implementation of the Basel Capital Accord in both
the U.S. and Canada. In 1992, another amendment to the Bank Act allowed banks to buy trust
companies. In addition, they were permitted to offer in-house activities and some other
services (portfolio management, investment advice, etc.), e.g. Calms (2004). Then, in line
with the 1996 amendment to the Basel regulation, the Canadian Bank Act introduced market
risk in the computation of risk-weighed-assets in 1997. This amendment was enforced in
1998.2 With the Basel II Accord, banks were recommended to account for operational risk
starting in 2004. However, they were obliged to account it and to implement the internal
rating based method for credit risk computation only in November 2007.
Against this Canadian regulatory background, we consider mainly three major
regulatory changes: (i) the 1987 amendment to the Bank Act allowing commercial banks to
acquire or merge with investment banks, (ii) the amendment to the Bank Act following Basel
I regulation (from 1988 to 1997), and (iii) the amendment to the Bank Act following the 1996
amendment to the Basel I Accord and subsequent amendments in the spirit of the Basel II
regulation. Under the Bank Act of 1987, naturally, if commercial banks acquire investment
dealers, the portion of their non-traditional revenue should increase since the main activities
of brokerage firms are non-interest income activities.3 Furthermore, economies of scope and
scale will enable the acquiring banks to generate more revenues and to diversify. Thus, from
1982 to today, non-interest income as share of total revenues has more than doubled in the
Canadian banking sector as illustrated in Figure 1.4 The dramatically increase of non-interest
income following the regulatory changes begs closer investigation to provide insights for
prudential regulations.

As illustrated by Table A1 in the Appendix borrowed from Hebb and Fraser (2002), the 1987 amendment to the
Bank Act has led to waves of mergers and acquisitions in the following decades. Indeed, Table 1 shows the main
acquisitions of investment banks by the Canadian big chartered banks between 1987 and 1996 following the
1987 Bank Act.
2
A report from the Office of the Superintendent of Financial Institutions (OSFI) of Canada mentioned the
following: Beginning January 1, 1998, deposit-taking institutions with significant trading portfolios are required
to maintain capital to cover market risks.
3
Traditional activities of commercial banks consist of credit activities generating net interest margin by taking
deposits and giving loans. Meanwhile, non-traditional activities draw profits mainly from brokerage,
securitization, underwriting, proprietary trading, insurance, and advisory services.
4
This is not unique to Canada, the same upward trend has been observed in other jurisdictions such as the USA
and Europe, e.g., DeYoung and Rice (2004) and Lepetit et al. (2008).

INSERT FIGURE 1 HERE.

Few studies have addressed the issue of non-traditional activities of Canadian
commercial banks in conjunction with their traditional activities following changes in the
banking regulations. Among the very few existing papers are Amoako-Adu and Smith (1995)
and Calms and Thoret (2010), who focus primarily on the impact of increasing non-interest
activities (following the 1987 amendment to the Bank Act) on Canadian banks risk-return
tradeoff. Also, for countries other than Canada, studies related to banks non-interest income
focus principally on the diversification and risk effects of non-traditional activities on banks
profitability induced by non-traditional and/or traditional activities (e.g., Smith et al. (2003)
and Stiroh (2004, 2006) for American banks; Baele et al. (2007), Jonghe (2010), Lepetit et al.
(2008), Mercieca et al. (2007), and Valverde and Fernandez (2007) for European banks;
Maudos and Solis (2009) for Mexican banks). Nevertheless, other studies have explored the
dynamics between interest and non-interest incomes. For instance, Lepetit et al. (2008),
Maudos and Solis (2009) and Williams and Rajaguru (2009) find these two types of revenues
to be substitutes, respectively, in the European, Mexican and Australian context. In the
American context, DeYoung and Rice (2004) find interest income and non-interest income to
be complements.
To the best of our knowledge, no study has addressed the implications of nontraditional activities of commercial banks using an integrated framework (risk, performance
and capital). In addition, the impact of diversification with non-traditional activity on capital
adequacy is still blurred in the literature. Furthermore, we use a relatively extensive dataset in
a Canadian banking study: we use quarterly financial statements and daily stock market data
from 1982 to 2010, which are longer than those in all other Canadian studies. Those was some
of our contributions to the literature and here is a highlight of some of our findings:
-

We show a substitution effect between non-interest income and interest income activities,
with significant increase in banks non-interest income following the coalescing between
commercials banks with other non-interest income generating financial institutions (e.g.
investment banks, brokerage firms, etc),

We come across evidence of a positive diversification effect of non-traditional activities in

the Canadian banking sector : the integration of different financial institution has decreased
risk and improved performance of Canadian banks,

We find that capital is not sensitive to the reshuffling of Canadian banks portfolio towards
non-traditional activities which may be explained by the stringent capital constraints on
Canadian banks in the form of both risk-sensitive and not risk-sensitive capital requirements.
From the evidence we gathered, Canadian banks have met the capital adequacy
requirements for aggregate traditional and non-traditional activities. This evidence help us to
understand why they have well managed the last subprime credit crisis. The rest of the paper
is structured as follows. Section 2 presents our empirical framework. Section 3 describes the
data and presents the descriptive statistics for the variables. Section 4 discusses and interprets
the empirical results. We run some robustness checks of our findings in Section 5 and
conclude with some policy implications in Section 6.
2. METHODOLOGY AND EMPIRICAL FRAMEWORK
Following Kwan and Eisenbeis (1997) and Altunbas et al. (2007), we formulate a
system of three simultaneous equations to study the endogenous impact of banks nontraditional activities on their risk, performance and capital. We use the System Generalized
Method of Moments (System-GMM) to estimate our parameters (e.g., Blundell and Bond,
1998). The empirical specification stands as follows:

where Xj,t is a vector of dependent variables: RISKj,t the risk of bank j at time t, PERFj,t the
performance measure of bank j at time t, and CAPj,t the capital ratio of bank j at time t. Xj,t-1 is
the lagged dependant variable. The two interest variables NIMj,t and NIIj,t are respectively the
net interest margin of bank j at time t and the non-interest income of bank j at time t. Zj,t is a
vector of control variables such as the size of the bank, the liquidity ratio, the assets growth
rate, etc. All of these variables are described below in more details. It is a dummy variable we
use to control for the effect of the bank regulations and subprime crisis. BANKj is a control
for specific bank effect and

is the error term.

2.1. Dependent variables

The dependent variables are defined and justified as follows:

RISKj,t, the risk variable is measured by total equity risk (TRISK). We calculate TRISK

using the standard deviation of daily equity returns over the quarter and then put it on a
quarter basis. Later, for robustness check, we also use the idiosyncratic risk (IRISK), the
implied assets risk (ARISK), the value at risk (VAR) and the expected shortfall (ESF).
We calculate IRISK using a GARCH (1,1)-in-Mean of conditional volatility on the
residual from a multifactor market model over the last quarter of daily observations. This is
similar to Song (1994), Flannery et al. (1997) and Calms and Thoret (2010), among others.5
We add an additional factor for exchange rate risk to the market multifactor model used by
Chen et al (2006) and Pathan (2009) as follows: Rj,t= 0,t + m,j Rm,t+ I,j UI,t+ x,jUx,t + j,t,
where Rj,t is the equity return of bank j at time t, Rm,t is the market premium, UI,t represents
the interest rate risk premium computed as the difference between the long-term Canadian
government bond yield and the T-bill yield, Ux,t is the exchange rate premium computed as
one minus the exchange rate of the Canadian dollar to the US dollar (the US dollar is the most
commonly used foreign currency in Canada) and j,t is the error term.
The risk measure ARISK is the implicit volatility of assets returns (V) obtained using
the approach of Ronn and Verma (1986). Total assets value (V) and its implicit volatility (V)
are obtained by solving a system of equations based on shareholders equity defined as a call
option: K = V N(x) B N(x-V

), with x = [Ln (V / B) + (VT/2)]/ V

and K = V V

N(x)/K, where V is the implicit total assets value (the first unknown), K is the market value of
equity, B is the book value of the banks total debt, K is the standard deviation of the banks
equity returns, V is the unobserved bank assets return volatility (the second unknown), is a
regulatory parameter, T is the maturity of the debt (we assume 1 year), N(.) is the standard
cumulative normal distribution function, and Ln is the logarithmic operator. The parameter
equals 0.97 as in Ronn and Verma (1986) and Giammarino et al. (1989) for American and
Canadian banks, respectively. Gueyie and Lai (2003) have also used this constant in their
study of bank moral hazard and the introduction of deposit insurance in Canada.
VAR is the 5th percentile of daily equity returns of the quarter, ranged from the
smallest to the biggest. For each quarter, ESF is computed as the mean of those ranged returns
which are lower than the VAR value (i.e., losses bigger than VAR).

We run several other conditional volatility specifications such as EGARCH and GJR (Glosten, Jagannathan and
Runkle (1993) approach). Evaluating the results with Akaike and Schwarzs criteria, we find GARCH-in-Mean
(GARCH-M) to be best.

PERFj,t, the performance measure is captured by the banks return on assets (ROA)

obtained as the ratio of net income over total assets over a quarter. For robustness check, as
alternative performance measures, we also use the banks mean daily stock market returns
(RET) over the last calendar quarter and the Tobins Q (QTOB) computed as the market value
of equity divided by its book value.
-

CAPj,t is the ratio of total shareholders equity to the risk-weighted-assets. It is a risk-

sensitive capital measure defined by the Basel Accords and used in Jacques and Nigro (1997)
among others. Since there was no such capital ratio requirement before 1988 (date of the
introduction of Basel I), for the period 1982 to 1987, we use the ratio of total shareholders
equity over total assets as in Flannery and Rangan (2008). For robustness check, we also use
the inversed leverage ratio (ILEV) measured by the ratio of shareholders equity over total
asset6 which is not risk-sensitive capital measure.
2.2. Control variables
The other main variables of interest are:
-

NIIj,t is the non-interest income of bank j at time t. It is measured by the ratio of the

banks non-interest revenues over its total assets. It is a proxy of non-traditional activities
conducted by Canadian banks. We expect such activities to be profitable and therefore, a
positive sign of its coefficient relative to the performance ratio. Furthermore, if nontraditional activities diversify Canadian banks risk, we expect a negative coefficient for the
risk proxy. Conversely, it will be positive and significant if these activities increase risk.
Related to capital, the expected sign can be either positive or negative, depending on the
impact of NII on risk. A significant increase in risk must result in an additional regulatory
capital charge (positive sign), while a decrease can result in a downward adjustment of
regulatory capital charge (negative sign) or an increase in bank capital buffer (positive sign).

Besides the minimum regulatory capital requirement, Basel imposes a maximum balance sheet leverage ratio,
measured by the ratio of assets to shareholders equity. From 1982 to 1991, a cap leverage ratio of 30 was in
effect for large banks in Canada. In 1991, the limit was decreased to 20, and this limit remains until 2000, when
it becomes authorized to reach 23 for institutions that demonstrate that, in substance, they (i) meet or exceed
their risk-based capital targets (e.g., 7% and 10%) (ii) have total capital of a significant size (e.g., $100 million)
and have well-managed operations that focus primarily on a very low risk market segment (iii) have a fourquarter average ratio of adjusted risk-weighted assets to adjusted net on- and off-balance sheet assets that is less
than 60% (iv) have adequate capital management processes and procedures (v) have been at stage 0 for at least
four consecutive quarters (vi) have no undue risk concentrations. This leverage ratio requirement has been
claimed to contribute to Canadian banking sector resilience to the credit turmoil (e.g., Bordeleau et al., 2009 and
Dickson, 2009).

NIMj,t, net interest margin, represents the performance on banks lending (traditional)

activities and is measured by interest revenues minus interest expenses divided by total assets.
It can be either substitute or complement to non-interest income. For instance, DeYoung and
Rice (2004) found the two types of revenues to be complements in the American context,
while, Lepetit et al. (2008) in the European context, Maudos and Solis (2009) for Mexican
banks, and Williams and Rajaguru (2009) for Australian banks, found the two revenues to be
substitutes.
We also include some additional control variables in the regressions to reflect banks
characteristics and strategic choices, as well as macroeconomic factors that can affect banks
risk, performance and regulatory capital. These variables are:
-

GNPGt is the growth rate of the gross national product (GNP) in real terms (the reference

year is 2002) at time t. We use the GNP instead of the GDP (gross domestic product) because
the GNP includes the GDP and other net labor and foreign capital incomes, used to account
for international banking activities. It is used to capture economic trend or business cycles
(e.g., Ayuso et al., 2004; Lindquist, 2004). We expect a negative relationship with risk (i.e.,
less risk when the economy is running well), and positive relationship with return and capital
buffer (i.e., more profit and more capital buffer in good economic conditions).
-

SIZEj,t represents the logarithm of total assets of bank j at time t and is used to control for

the size effect (e.g., Jacques and Nigro, 1997; Rime, 2001; among others). It controls for the
fact that larger banks may be inherently more stable particularly since idiosyncratic risk tends
to decline with size (Baele et al., 2007). Larger banks may also have better diversification
opportunities and thus less income volatility from branching into new markets (Sanya and
Wolfe, 2010). However, as size increases, so does the likelihood of banks be bailed out by
government assistance in the event of financial distress (i.e., Too-big-To-Fail Paradigm). As
the result of the moral hazard issue that is likely to occur for larger banks due to this
government assistance, larger banks can engage in riskier activities and hold less capital. Thus
the sign of the size coefficient is ambiguous for both risk and capital.
-

LIQUIDj,t is the liquidity ratio of bank j at time t. It is calculated as the ratio of cash

balance over total assets. Banks with higher cash can readily meet short-term financial
obligations without having to untimely sale its investments or fixed assets. On the other hand,
cash holding is less profitable, as the interest rates on cash balances are very low. The
expected sign of this variable is negative for risk and performance and positive for capital.

AGROWTHj,t is the assets growth rate of bank j at time t. It is calculated as the

percentage change in assets value from the previous quarter. We expect this variable to be
positive in the risk equation as rapid assets growth may increase banks portfolio risk.
However, its sign is undetermined in advance for performance and capital ratio. Indeed, even
if risky, new assets can turn out to be more profitable and help banks increase their capital
buffer, the reverse is also likely to happen.
-

LLPROVj,t is the ratio of loan loss provision over total loans of bank j at time t. It is a

proxy of credit risk. We anticipate a positive relationship between LLPROV and risk or
capital, and a negative association with returns.
2.3. Dummy variables
-

DUMt is a set of dummy variables capturing the following regulatory changes:7 (i) the

1987 amendment to Bank Act [event 1], (ii) the period of the initial Basel I Accords from
1988 to 1997 [event 2] and (iii) the period of the 1996 amendment to Basel I Accords and
Basel II period since 1998 [event 3]. For simplicity, we set DUM to be equal to DEC in event
1, REG1 in event 2 and REG2 in event 3. DEC controls for the merging of chartered banks
with other financial institutions: first with brokerage firms and investment dealers after the
1987 amendment to the Bank Act, then with trust companies following the amendment of
1992. For each bank, it is equal to 0 before the first acquisition by the bank of either a
brokerage firm or an investment dealer, and 1 after.8 REG1 accounts for the initial Basel I
effect. It takes 1 over the period 1988 to 1997 and zero elsewhere since the chartered banks
enforce themselves to adjust their capital and risk level since the announcement of the
regulation. In 1992, the banks were supposed to be already aligned with the framework.
REG2 controls for the 1997 amendment to the Bank Act and Basel II period. The 1997
amendment was enforced in 1998, therefore, REG2 takes the value 1 after 1997 and zero
otherwise. This last period covers the post amendment to Basel I period and the spirit of Basel
7

As described earlier, significant Canadian Bank Act amendments were made the last quarter century. In 1987,
banks were allowed to hold ownership in investment dealers. In 1988, Basel regulations has introduced credit
risk and by 1992 Canadian banks were supposed to account for this risk in their risk weighed assets computation.
Allen (2003) stipulated that 1992 was the year of full implementation of the Basel Capital Accord in both the
U.S. and Canada. In 1992, another amendment to the Bank Act allowed banks to buy trust companies. In
addition, as pointed out by Calms 2004, they were permitted to offer in-house activities and some other
services. Then, on the lights of the 1996 amendment to Basel regulation, Canadian Bank Act starts an
amendment adopting the introduction of market risk in the computation of risk-weighed-assets in 1997. This
amendment was enforced in 1998.
8
For example, for the Bank of Montreal (BMO), DEC will take value of 0 from the first quarter of 1982 to the
second quarter of 1987 and 1 from the third quarter of 1987 to the last quarter of 2010. Indeed from Table A1,
the first acquisition by Bank of Montreal occurred in August 1987.

10

II at the beginning of 2000, and can be seen as a period of major improvements made to the
initial Basel I Accords.
-

SUBPRIMEj,t is a dummy variable that takes the value one for quarters in years 2007,

2008 and 2009 and zero otherwise. It is used to control for the effect of the recent subprime
crisis. It is expected to be positively associated with risk and negatively associated with
returns. For the impact of this dummy on the regulatory capital ratio, the sign is undetermined
since although we expect more capital holdings by banks during this period, the scarcity of
financial resources makes it difficult for banks to raise additional capital.
As said above, we run the regression equations 1, 2 and 3 using a System-GMM that
allow dynamic panel estimation. The System-GMM is preferred over First-Differenced-GMM
for several reasons. First, the System-GMM approach generally produces more efficient and
precise estimates than First-Differenced-GMM by improving precision and reducing the finite
sample bias (Baltagi, 2008). Second, our sample is a slightly unbalanced panel as some banks
have missing data over some quarters. With an unbalanced panel it is better to avoid FirstDifferenced-GMM which has a weakness of magnifying gaps (Roodman, 2006, p. 19). Third
System-GMM makes it possible to include time-invariant variables such as specific regulatory
change variables, which will otherwise disappear in First-Differenced-GMM (Sanya and
Wolfe, 2010).
3. DATA AND DESCRIPTIVE STATISTICS
As of September 05th 2013, the Canadian banking sector comprises 28 Canadian
banks, 24 subsidiaries of foreign banks and 24 branches of foreign banks offering a range of
full financial services. It had approximately $ 3000 billion of assets under management as of
end 2012. Our sample is composed of the six Canadian chartered banks. As of last quarter of
2012, the six banks of the sample are ranked in terms of assets size as follows: the Royal
Bank of Canada (RBC), the Toronto-Dominion Bank (TD), the Bank of Nova Scotia (BNS),
the Bank of Montreal (BMO), the Canadian Imperial Bank of Commerce (CIBC) and the
National Bank of Canada (NBC). They represent approximately 90% of the total assets of the
Canadian banking sector in general and 75% of the assets of the deposit institutions sector in
particular.
All banks specific variables have been calculated using data extracted from
Bloomberg and supplemented by data collected manually from various banks annual reports.

11

For Canadian economic variables, we obtain the data from Statistics Canada and the Bank of
Canada. The sample is composed of quarterly financial statements and daily market
observations from 1982 to 2010.
Table 1 presents the definition and descriptive statistics (number of observations,
means and standard deviations) of the variables. The number of observations used is relatively
substantial in Canadian banking study, more than 600 quarterly book observations. 9 We
observe an average capital level (CAP) of 14.5% between 1982 and 2010 for the six banks
with a standard deviation of 4.6%. The inversed leverage ratio (ILEV) is about 4.8% for the
same period with a standard deviation of 0.8%. The quarterly average NIM and NII are
respectively, 0.6% and 0.4%, with standard deviations of 0.1% in the two cases. Per quarter,
we find an average total risk (TRISK) of 1.4% (standard deviation of 0.7%), implicit assets
volatility (ARISK) of 0.1% (standard deviation of 0.05%), idiosyncratic risk (IRISK) of 1.2%
(standard deviation of 0.6%), value at risk (VAR) of 2.2% (standard deviation of 1.0%) and
expected shortfall of 2.7% (standard deviation of 1.4%). Moreover, the average return on
assets (ROA) is 0.2% between 1982 and 2010 for the six banks with a standard deviation of
0.2%. The quarterly stock market return (RET) is 3.9% with a standard deviation of 11.3%,
while the Tobin Q (QTOB) is about 1.36 for the same period with a standard deviation of
0.52.
INSERT TABLE 1 HERE.
Table 2 presents the pairwise correlations between the variables. NII and NIM are
negatively correlated (-52.50%). The capital ratio (CAP) is negatively correlated with net
interest margin NIM (-43.20%) and positively correlated with non-interest income NII
(40.70%). The revenue from non-traditional activities (NII) is also negatively correlated with
TRISK (-1.60%), positively correlated with IRISK (0.30%) and ARISK (25.30%). The
correlation between idiosyncratic risk and total risk is naturally high 94.60%, while the
correlation between total risk (TRISK) and assets volatility (ARISK) is relatively less
pronounced 77.77%. The correlation between value at risk (VAR) and expected shortfall
(ESF) is high 82.3%.

Shaffer (1993), who tested the competition among Canadian banks, uses only annual data between 1965 and
1989, i.e., only 24 observations. Nathan and Neave (1989) use 39 observations, D'Souza and Lai (2003) use 125
quarterly observations, Gueyie and Lai (2003) use 115 annual observations, and in the best case, we have Allen
and Liu (2007) with 480 quarterly observations.

12

INSERT TABLE 2 HERE.

4. RESULTS AND DISCUSSION
As we stressed in the introduction, this paper studies the effect of non-interest income
on Canadian banks risk, returns and capital in general, and under different regulatory changes
to the Bank Act of Canada. Our focus is primarily on non-interest income, since following the
1987 amendment to the Bank Act, commercial banks were authorized to undertake
investment banking activities, which translates into massive acquisitions of (or merger with)
investment dealers and brokerage firms by commercial banks.

4.1. Relationship between NIM and NII: Substitutes or Complements?

Figure 2 shows the gross measures of interest and non-interest incomes in the
Canadian banking sector. Since 1997, revenues from non-traditional activities exceed those
earned from traditional activities. This trade-off between these two revenues merits deeper
scrutiny.
INSERT FIGURE 2 HERE.
To further illustrate the behavior of non-traditional activities relative to traditional
activities, we presented in Figure 3 the trend of the ratio of net interest margin over total
assets (NIM) and non-interest income over total assets (NII) over time. The plot shows
globally a significant increase in revenues from non-traditional activities and a decrease in
revenues from traditional activities. Overall, the two incomes (non interest versus net interest)
seem to be substitutes. Before the 1996 amendment to Basel I, net interest income is higher
than non-interest income, but after 1997, revenues from non-traditional activities begin to
exceed those earned from traditional activities. This substitution effect is probably due to the
downward trend observed in the traditional activities (as shares of total assets) probably
because of the reshuffling of banks portfolio composition that takes place following the
amendment to the Bank Act.
INSERT FIGURE 3 HERE.
Giving the relatively high risk of non-traditional activities documented in the
literature, we expect non-interest revenues to be more volatile than interest incomes. To
analyze this behavior, we use the Hodrick-Prescott filter to extract the cyclical and trend
13

components of NIM and NII. In Figure 4, we plot the two trends. The patterns observed
confirm the high volatility of non-interest income (Panel A) and its increasing trend (Panel
B), and the decreasing trend of net interest margin. These patterns confirm the substitution
effect observed previously.
INSERT FIGURE 4 HERE.
To further explore this substitution effect between non-traditional and traditional
activities, we use a mean comparison test over different regulatory periods. The results
presented in Table 3 show that NII has significantly increased for all banks, without
exception, over the different periods considered. Indeed, the revenue structure over the period
1987-1997 is significantly different from that of the period before 1987, which means that NII
has increased significantly over the two periods. At the same time, the trend of NIM is
ambiguous. For the Royal Bank of Canada (RBC) and the Bank of Montreal (BMO), NIM has
increased between the two periods, while for the Toronto Dominion Bank (TD) and the
National Bank of Canada (NBC), it has decreased. For the remaining banks (i.e., Bank of
Nova Scotia (BNS) and the Canadian Imperial Bank of Commerce (CIBC)), the change in
NIM is not significant. Overall, the means NIM between the two periods are not significantly
different. Comparing the means of the periods 1987-1997 and post 1997, we still observe that
NII has increased over time and the mean NII are significantly different between the two
periods. The NIM, instead, has significantly decreased for all banks.
INSERT TABLE 3 HERE.
Table 4 presents regression results of the determinants of NIM and NII. The regression
results clearly show that NIM and NII are negatively related, and significant at the 5%
significance level, which means that the two activities are substitutes.
INSERT TABLE 3 HERE.
To sum up, the mean tests between the three periods show that NII not only
significantly increased after the 1987 amendment to the Bank Act, but also consistently
continued to increase throughout the Basel implementation process. In Table 4, the coefficient
of DEC, REG1 and REG2 are all positive and significant for DEC and REG1. The NIM
however, experienced significant decline over the period 1990 to 2010. Additionally, the
regressions involving each of the income as determinant of the other confirm the substitution
effect between the two income streams. One reason for the increasing NII and the declining

14

NIM can be attributed to financial disintermediation in the Canadian banking sector,

especially in the 1990s, as well as to the continuous decline of interest rate on financial
markets, as shown the case of the one year treasury bills on figure 5.
4.2. Impact of non-traditional activities on banks risk exposure
To answer our second research question, we run the system of simultaneous equations
(1-3), which accounts for the possible endogeneity between risk, performance and capital. In
the regression equations, the general impact of non-traditional activities on banks risk is
captured by the coefficient of NII, while DUM, the regulatory dummy (represented by either
DEC, REG1 or REG2) captures the impact of regulatory changes. The regressions results are
reported in Table 5 with total risk (TRISK) used as risk measure. Later, we run the same
regressions with idiosyncratic risk (IRISK), the implicit assets volatility risk (ARISK), Value
at Risk (VAR) and expected shortfall (ESF) for robustness.
INSERT TABLE 5 HERE.
From columns 1, 4 and 7 of Table 5 we observe that the coefficient of NII is generally
negative for TRISK, and significant at the 5% and 10% levels in the three columns.
Regarding the regulatory changes, the coefficients of DEC and REG1 are also negative and
significant at 10% levels for DEC. Clearly, Canadian banks expansion in non-traditional
activities has reduced their total risk in general, an evidence of the diversification effect of
these non-traditional activities. This result complements Amoako-Adu and Smith (1995) who
found that the 1987 amendment to the Bank Act had no significant impact on Canadian
banks systematic risk. It is in line with the findings in other jurisdictions, e.g. Smith et al.
(2003) in the American case, Lepetit et al. (2008) for European banks and Sanya and Wolfe
(2010) for other international studies, who found a decreasing impact of non-interest income
on risk. NIM is also negatively related to total risk. The negative coefficients of NII and NIM
support the diversification argument through the substitution effect between NII and NIM,
which reduces the total risk of the bank.
The other control variables have more or less the expected signs. For instance, the
coefficient of the first lag of TRISK is generally positive and significant at 1% level,
suggesting a dynamic nature of banks risk decisions. GNPG is negatively and significantly
related to the total risk measure. This corroborates Shim (2012) result who found for a US
sample, a negative and significant relationship between the change in risk and economic
cycle, approximated by the rate of growth of GNP. This means that banks risk is related to
15

business cycle in an anti-cyclical manner. Specifically, as an expansionary phase of the

economy is associated with relatively lower non-performing loans ratio, so do total risk.
Credit risk approximated by LLPROV contributes positively to total risk increase. The
coefficient of SUBPRIME is also positive and significant at 10% level.
In sum, expansion of Canadian banks in non-traditional activities has resulted in the
reduction of their total risk. This stems from the diversification benefit from these non-interest
income activities due to the substitution effect between non-traditional and traditional
activities that takes place following the amendment to the Bank Act in 1987 which allowed
banks to acquire or merge with investment dealers and brokerage firms.
4.3. Impact of non-traditional activities on banks capital level
Having studied the impact of the increase of non-traditional activities on Canadian
banks risk exposure, we next address our third research question, i.e., the impact of these
non-traditional activities on Canadian banks capital ratio. Indeed, capital regulations such as
Basel Accords are intended to force banks to hold capital charges against their risk exposures
(credit, market, operational). Between 1988 and 1997 (period before the major amendment
to the Basel I Accords was in effect), capital risk charges were associated to credit risk, in
other words, to interest income activities such as debts, loans and credit derivatives.
Therefore, all else being equal, we might expect banks to increase their non-interest income
activities requiring less capital charges during that period. But after the 1996 amendment to
the Basel I Accords and Basel II, this trend may change since in 1998 market risk has been
introduced as a new risk category and later Basel II requires capital charges against
operational risk.
To analyse the possible impact of this increasing trend in non-traditional activities on
Canadian banks capital, we introduce NII, as well as DEC, REG1 and REG2 in the
regression equation where CAP is used as dependent variable. The results of the regressions
presented in columns 3, 6 and 9 of Table 5, show that increases in non-interest income have
no significant impact on Canadian banks capital ratio in general. The explanation lies in the
fact that, in the 1990s, Canadian regulators not only maintained the minimum regulatory
capital requirement, but also reduced the leverage ratio limit. 10 Indeed, Canadas banking
authority capped the balance sheet leverage ratio at 30 from 1982 to 1991. Late in 1991, the
authority decreased the limit to 20, where it remained until 2000, when it rose to 23 under
10

See Guidara et al. (2013) for further details.

16

certain conditions. This leverage ratio requirement has been shown to mitigate asymmetric
information and agency problems (e.g., Blum, 2008), and some claim that it contributed to the
Canadas banking sector resilience in the recent credit turmoil (e.g., Bordeleau et al., 2009
and Dickson, 2009). Also, after 2000, Canada increased the minimum regulatory capital-toRWA ratio from 8% to 10%. These regulatory changes increased the level of capital in
Canadas banking sector after 1998, since one would have expected the capital ratio to
decrease or remain more or less the same after the introduction of market risk as a new risk
category. These exogenous changes in Canadian banks capital level imposed by the Canadian
regulator may explain the non-significant impact of NII on CAP.
From the evidence we gathered, Canadian banks have met the capital adequacy
requirements for aggregate traditional and non-traditional activities. This evidence helps us to
understand why they have well managed the last subprime credit crisis. Below, we run the
regressions with the inverse of the leverage ratio (ILEV) for robustness checks.
4.4.Impact of non-traditional activities on banks performance
To address our fourth and last research question, we next analyse the impact of the
increasing trend in non-interest income activities on Canadian banks performance measured
by the return on assets (ROA). Later, we conduct additional regressions for robustness check
with alternative performance measures using marked to market performance measure (stock
market returns (RET)) and hybrid performance measure (Tobins Q (QTOB)). The results
with ROA are presented in columns 2, 5 and 8 of Table 5.
We find that increases in non-traditional activities have had a positive impact on banks
profitability. The coefficient of NII is positive and significant at 1% level in column 2, and
5% in columns 5 and 8. Hence, expansion in non-traditional activities has increased the
performance of Canadian banks. These results corroborate those previously found in the
literature. For instance, Rogers (1998) found that efficiency estimation which omits nontraditional output understates bank efficiency. The contribution of traditional activities,
captured by NIM, to profitability is positive but not significant in all regressions. Again
diversifying their activities into non-traditional activities has positive return benefit for
Canadian banks. Here also the other control variables have more or less the expected signs for
their coefficients. For instance, as expected, loans loss provision (LLPROV) has a negative
impact on banks performance.

17

5. Robustness checks
5.1. Alternative risk measures
For robustness checks, we re-ran the above regressions with different risk measures,
namely the idiosyncratic risk (IRISK), the implicit assets volatility risk (ARISK) obtained
using Ronn and Verma (1986), value at risk (VAR) and expected shortfall (ESF). The
calculation of these risk measures has been provided above in Section 2. The results are
presented in Table 6 for IRISK, Table 7 for ARISK, Table 8 for VAR and Table 9 for ESF.
The signs of the coefficients confirm the results of Table 5. With IRISK and ARISK,
the coefficients of NII and NIM are generally negative, although not always significant,
which confirms the diversification benefit on banks total risk. The coefficients for DEC and
REG1 are negative and significant at least at the 10% level for IRISK, while that of REG1 is
negative and significant at least at the 10% level for ARISK. Overall, the results obtained
with these alternative risk measures support our previous finding, i.e. a reducing effect of non
interest activities on Canadian banks risk.
INSERT TABLES 6, 7, 8 & 9 HERE.
5.2.Not risk-sensitive capital measure
We also use the inversed leverage based capital ratio (ILEV) as an alternative capital
measure not risk-sensitive to check for our results robustness. In fact, the inversed leverage
based capital ratio is measured by the ratio of shareholders equity over total. The results
presented in Table 8 confirm the previous finding that non traditional activities has a nonsignificant impact on capital regardless the measure is risk-sensitive (CAP) or not risksensitive (ILEV).
INSERT TABLE 8 HERE.
5.3. Marked to market performance measures
As an alternative performance measure, we use the stock market returns (RET) as marked
to market performance measure and Tobins Q (QTOB) which is an hybrid performance
measure including book and market based strands. The results are presented in Table 9 for
RET and Table 10 for QTOB. Again we found that increases in non-traditional activities has a
very positive impact on RET or QTOB at the 1% significance level. With regards to the
regulation dummies, DEC and REG2 have negative contributions to banks performance. It
18

looks like that the negative contribution of DEC is driven by the period covered by REG2, the
strengthening of Canadian banks capital base by the Canadian regulator, which has a
reducing effect on the performance of Canadian banks.
INSERT TABLE 9 HERE.
INSERT TABLE 10 HERE.

6. Conclusion
The main purpose of this study was to test the impact of non-traditional activities of
Canadian banks on their risk, performance and capital adequacy under different regulatory
changes. We use a sample of quarterly financial statements and daily stock market
observations of the six big Canadian chartered banks from 1982 to 2010. We use the SystemGMM approach for our estimations. Three regulatory regimes are considered: (1) the 1987
amendment to the Bank Act which allowed Canadian banks to enter investment banking
activities; (2) the Basel I regulation period from 1988 to 1997, and (3) the 1996 amendment of
Basel I and Basel II regulation period, i.e. 1998-2010, which introduce, respectively, market
risk and operational risk as distinct categories of risks in the calculation of the risk-weightedassets.
We found that the 1987 amendment to the Bank Act, allowing banks to acquire
investment banks, contributes to increase the share of non-interest income in the total revenue
structure of Canadian banks. Over the study period, we found non-interest income and net
interest margin to be substitutes. We also found that increases in non-interest activities had a
significant reduction effect on Canadian banks risk exposure and positive impact on their
returns; however, it had no significant impact on Canadian banks capital ratio. The negative
impact of non-traditional activities on risk and positive effect on returns stem from the
benefits from diversification following the increase in non-interest income activities in
Canadian banks portfolio. Moreover, the reshuffling of Canadian banks portfolio towards
non-traditional activities did not reduce their capital ratio, which tends to support the
effectiveness of capital adequacy regulation in Canada in linking banks capital and risk in
spite of the permissive trend towards universal banking. This tends to suggest that a
successful merging of commercial banks with investment dealers and brokerage firms should
pass through effective capital adequacy. In addition, we give support to the effectiveness of

19

joining risk-sensitive and not risk-sensitive capital measures in a capital adequacy framework
as suggested by Basel III.

20

References
Allen, J., Liu, Y., 2007, Efficiency and economies of scale of large Canadian banks, Canadian
Journal of Economics, 40, pp. 225-244.
Allen, L., 2003, The Basel capital accords and international mortgage markets: A survey of
the literature, Financial Markets, Institutions and Instruments, 13, 2, pp. 41-108.
Altunbas, Y., Carbo, S., Gardener, E. P. M., Molyneux, P., 2007, Examining the relationships
between capital, risk and efficiency in European banking, European Financial
Management, 13, 1, pp. 49-70.
Amoako-Adu, B., Smith, B., 1995, The wealth effects of deregulation of Canadian financial
institutions, Journal of Banking and Finance, 19, pp. 1211-1236.
Ayuso, J., Perez, D., Saurina, J., 2004, Are capital buffers pro-cyclical? Evidence from
Spanish panel data, Journal of Financial Intermediation, 13, pp. 249-264.
Baltagi, B. H., 2008, Econometric Analysis of Panel Data, John Wiley & Sons Ltd.
Baele, L., Jonghe, O.D, Vennet, V.R., 2007, Does the stock market value bank
diversification? Journal of Banking and Finance, 31, 7, pp. 1999-2023.
Blum, J., 2008, Why Basel II may need a leverage ratio restriction, Journal of Banking and
Finance, 32, 8, pp. 16991707.
Blundell, R.W., Bond, S.R., 1998, Initial conditions and moment restrictions in dynamic
panel data models, Journal of Econometrics, 87, pp. 115143.
Bordeleau, E., Crawford, A., Graham, C., 2009, Regulatory constraints on bank leverage:
Issues and lessons from the Canadian experience, Discussion Paper 2009-15, Bank of
Canada.
Calms, C., Thoret, R., 2010, The impact of off-balance-sheet activities on banks returns: An
application of the ARCH-M to Canadian data, Journal of Banking and Finance, 34, 7,
pp. 1719-1728.
Calms, C., 2004, Regulatory changes and financial structure: The Case of Canada, Swiss
Journal of Economics and Statistics, Swiss Society of Economics and Statistics, 140, 1,
pp. 1-35.

21

Chen, C.R., Steiner, T.L., Whyte, A.M., 2006, Does stock option-based executive
compensation induce risk-taking? An analysis of the banking industry, Journal of
Banking and Finance, 30, pp. 915-945.
DeYoung, R., Rice, T., 2004, Noninterest income and financial performance at U.S.
commercial banks, The Financial Review, 39, pp. 101-127.
D'Souza, C., Lai, A., 2003, Does diversification improve bank efficiency? The evolving
financial system and public policy, pp 105127, Proceedings of a conference held by
the Bank of Canada, December 2003, Ottawa, Bank of Canada.
Dickson, J., 2009, Capital and procyclicality in a turbulent market, Office of the
Superintendent of Financial Institutions Canada (OSFI), Remarks to the RBC Capital
Markets Canadian Bank CEO Conference, Toronto, Ontario, January 8.
Flannery, M.J., Hameed, A., Harjes, R., 1997, Asset pricing, time-varying risk premia and
interest rate risk, Journal of Banking and Finance, 21, pp. 315335.
Flannery, M., Rangan, K., 2008, What caused the bank capital build-up of the 1990s?, Review
of Finance, 12, pp. 391-429.
Giammarino, R., Schwartz, E., Zechner, J., 1989, Market valuation of bank assets and deposit
insurance in Canada, Canadian Journal of Economics, 22, pp. 109-127.
Glosten, L.R., Jagannathan, R., Runkle, D., 1993, On the relation between the expected value
and the volatility of the nominal excess return on stocks, Journal of Finance, 48, 5, pp.
1779-1802.
Gueyie, J.P., Lai, V.S., 2003, Bank moral hazard and the introduction of official deposit
insurance in Canada, International Review of Economics and Finance, 12, pp. 247273.
Guidara, A., Lai, V.S., Soumar, I., Tchana Tchana, F., 2013, Banks capital buffer, risk and
performance in the Canadian banking system: Impact of business cycles and
regulatory changes, Journal of Banking and Finance, 37, pp. 33733387.
Hebb, M.G., Fraser, D.R., 2002, Conflict of interest in commercial bank security
underwritings: Canadian evidence, Journal of Banking and Finance, 26, pp. 19351949.

22

Jacques, K., Nigro, P., 1997, Risk-based capital, portfolio risk, and bank capital: A
simultaneous equations approach, Journal of Economics and Business, 49, pp. 533-547.
Jonghe, O.D., 2010, Back to the basics in banking? A micro-analysis of banking system
stability, Journal of Financial Intermediation, 19, 3, pp. 387417.
Kwan, S., Eisenbeis, R., 1997, Bank risk, capitalization and operating efficiency, Journal of
Financial Services Research, 12, pp. 117-131.
Lepetit, L., Nysa, E., Rousa, P., Tarazi, A., 2008, The expansion of services in European
banking: Implications for loan pricing and interest margins, Journal of Banking and
Finance, 32, pp. 2325-2335.
Lindquist, K., 2004. Banks buffer capital: How important is risk? Journal of International
Money and Finance, 23, pp. 493-513.
Maudos, J., Solis, L., 2009, The determinants of net interest income in the Mexican banking
system: An integrated model, Journal of Banking and Finance, 33, 10, pp. 1920-1931.
Mercieca, S., Schaeck, K., Wolfe, S., 2007, Small European banks: Benefits from
diversification? Journal of Banking Finance, 31, pp. 1975-1998.
Nathan, A., Neave, E. H., 1989, Competition and contestability in Canadas financial system:
Empirical results, Canadian Journal of Economics, 22, pp. 576-594
Pathan, S., 2009, Strong boards, CEO power and bank risk-taking, Journal of Banking and
Finance, 33, pp. 1340-1350.
Rime, B., 2001, Capital requirements and bank behaviour: Empirical evidence for
Switzerland, Journal of Banking and Finance, 25, pp. 789-805.
Roodman, D., 2006, How to do xtabond2: An introduction to difference and system
GMM in Stata, Center for Global Development Working Paper, 103.
Rogers, K.E., 1998, Non-traditional activities and the efficiency of US commercial banks,
Journal of Banking and Finance, 22, pp. 467-482.
Ronn, E., Verma, A., 1986, Pricing risk-adjusted deposit insurance: An option based model,
Journal of Finance, 41, pp. 871-895.

23

Sanya, S., Wolfe, S., 2010, Can banks in emerging economies benefit from revenue
diversification? Working paper.
Shaffer, S., 1993, A test of competition on Canadian banking, Journal of Money, Credit and
Banking, 25, pp. 49-61.
Shim, J., 2012, Bank capital buffer and portfolio risk: The influence of business cycle and
revenue diversification, Journal of Banking and Finance, 37, pp. 761-772.
Smith, R., Staikouras, C., Wood, G., 2003, Non-interest income and total income stability,
Bank of England, Working Paper N 198.
Song, F., 1994, A two factor ARCH model for deposit-institution stock returns, Journal of
Money Credit and Banking, 26, pp. 323340.
Stiroh, K., 2004, Diversification in banking: Is noninterest income the answer?, Journal of
Money, Credit and Banking, 36, pp. 853-882.
Stiroh, K., 2006, A portfolio view of banking with interest and noninterest assets, Journal of
Money Credit and Banking, 38, pp. 1351-1361.
Valverde, S.C., Fernandez, F.R., 2007, The determinants of bank margins in European
banking, Journal of Banking and Finance, 31, pp. 2043-2063.
Williams, B., Rajaguru, G., 2009, The chicken or the egg? The trade-off between bank noninterest income and net interest margins, The campus for finance research conference
2009 (Germany).

24

Figure 1: Interest and non-interest incomes as percentages of total revenue (1982-2010)

19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10

.2

.4

.6

The left axis represents the ratio of net interest margin over total revenue (NIM/R) and non-interest
income over total revenue (NII/R). We use quarterly data between 1982 and 2010. The plots are for
average for all the Big 6 banks.

Year
NIM/R

NII/R

25

Figure 2: Interest and non-interest incomes in dollars (1982-2010)

19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10

1000

2000

3000

The left axis represents the dollar amounts of net interest margin (NIMD) and non-interest income
(NIID). We use quarterly data between 1982 and 2010. The plots are for the average for all the Big 6
banks.

Year
NIMD

NIID

26

Figure 3: Interest and non-interest incomes as percentages of total assets (1982-2010)

19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10

.002

.004

.006

.008

.01

The left axis represents the ratio of net interest margin over total assets (NIM) and non-interest income
over total assets (NII). We use quarterly data between 1982 and 2010. The plots are for the average for
all the Big 6 banks.

Year
NIM

NII

27

Figure 4: Cyclical and trend components of interest and non-interest incomes (1982-2010)
We use Hodrick Prescott filter on quarterly observed data between 1982 and 2010. NII is for noninterest income over total assets and II for interest income over total asset. The plots are for the
average for all the Big 6 banks.

19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10

-.004

-.002

.002

.004

A. Cyclical component of NII and II

Year
II

NII

19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10

.01

.02

.03

B. Trend components of NII and II

Year
IIs

NIIs

28

Figure 5: Evolution of Canadian daily interest rates (1982-2010)

15

Interest rates (%)

TB1M
TB3M
TB6M
TB1Y
10

0
1983/01/04

1990/10/29

1998/07/23
Time in days

2010/12/31

29

Table A1: Major acquisitions of dealers and brokers by the big Canadian banks
from 1987 to 1996
Bidding bank

Target dealer or broker

Announcement date Effective date

Bank of Montreal

Nesbitt Thomson

1987-08-13

1987-08-13

Nova Scotia Bank

McLeod Young Weir

1987-09-30

1988-03-30

Royal Bank of Canada

Dominion Securities

1987-11-16

1988-07-18

Canadian Imperial Bank of

Commerce
National Bank of Canada

Wood Gundy Corp.

1988-01-26

1988-06-13

Levesque Beaubien

1988-04-07

1988-12-13

National Bank of Canada

Geoffrion Leclerc

1989-06-02

1989-01-07

Canadian Imperial Bank of

Commerce
Bank of Montreal

Merrill Lynch Canada

1990-01-03

1990-01-15

Burns Fry Holdings

1994-07-18

1994-01-09

Royal Bank of Canada

Richardson Greenshields

1996-08-29

1996-01-11

Source: Hebb and Fraser (2002) from Securities Data Corporation Mergers & Acquisitions Database.

30

Table 1: Descriptive statistics of the variables

Data are from 1982 (Q1) to 2010 (Q4). Financial statement variables are quarterly observations. Market variables are daily observations converted to
quarters.
VARIABLES
CAP
ILEV
NIM
NII
ROA
RET
QTOB
TRISK
ARISK
IRISK
VAR
ESF
GNPG
LIQUID
SIZE
AGROWTH
LLPROV
SUBPRIME
DEC
REG1
REG2

DESCRIPTION
Book capital ratio = Total shareholders equity / Risk weighted assets
Inversed leverage ratio = Total shareholders equity / Total assets
Ratio of net interest margin = (Interest income Interest expenses) / Total assets
Ratio of non-interest income = Non-interest income / Total assets
Return on assets = Net income / Total assets
Mean daily market stock return, reported on a quarter basis
Market value of equity / Book value of equity
Total risk = Standard deviation of daily equity returns over the last quarter
Implicit volatility of assets computed using Ronn and Verma (1986) approach
Idiosyncratic risk = Conditional variance estimated by a GARCH-M (1,1) of errors
in a multifactor model
Value at Risk = 5th percentile of daily equity returns in the quarter (absolute value)
Expected shortfall = mean of daily equity returns in the quarter below VAR
(absolute)
Growth rate of the Gross National Product (GNP)
Liquidity ratio = Cash balance / Total assets
Logarithm of the total assets of the bank
Assets growth rate = Percentage change in total assets value over the last quarter
Loan loss provision ratio = Total loan loss provision / Total loan
Dummy variable taken value of 1 for years 2007, 2008 and 2009, and 0 otherwise
Dummy variable taken value of 1 after the effective date of the first acquisition of a
brokerage or dealer firm by the bank, and 0 otherwise
Dummy variable taken value 1 over the period 1988-1997 and 0 elsewhere
Dummy variable taken value 1 over the period 1998-2010 and 0 elsewhere

OBS
685
685
680
680
681
667
669
666
666

MEAN
0.145
0.048
0.006
0.004
0.002
0.039
1.364
0.014
0.001

STD. DEV.
0.046
0.008
0.001
0.001
0.002
0.113
0.520
0.008
0.000

MIN
0.060
0.026
-0.002
-0.004
-0.006
-0.390
0.439
0.005
0.000

MAX
0.289
0.073
0.009
0.009
0.013
0.507
2.860
0.104
0.004

666
666

0.012
0.022

0.007
0.011

0.005
0.006

0.107
0.096

666
696
630
685
679
693
696

0.027
0.006
0.012
11.854
0.019
0.002
0.569

0.014
0.007
0.015
0.835
0.041
0.002
0.495

0.007
-0.022
0.002
9.785
-0.216
-0.001
0.000

0.114
0.021
0.114
13,543
0.260
0.019
1.000

696
696
696

0.774
0.351
0.445

0.418
0.477
0.497

0.000
0.000
0.000

1.000
1.000
1.000

31

Table 2: Pairwise correlations between variables

Pairwise correlations higher than 20% in absolute value are highlighted in bold.

CAP
ILEV
NIM
NII
ROA
TRISK
ARISK
IRISK
VAR
ESF
GNPG
LIQUID
AGROW
LLPROV
SIZE

CAP
1.000
0.307
-0.432
0.407
-0.171
0.050
0.308
-0.010
0.167
0.070
-0.174
0.164
0.060
-0.143
0.617

VAR
ESF
GNPG
LIQUID
AGROW
LLPROV
SIZE

VAR
1.000
0.823
-0.214
-0.056
-0.140
0.115
0.151

ILEV

NIM

NII

ROA

TRISK

ARISK

IRISK

1.000
0.068
0.204
-0.093
-0.018
0.217
-0.063
0.045
0.025
-0.207
-0.073
-0.033
-0.043
0.164

1.000
-0.525
0.136
-0.099
-0.420
-0.069
-0.158
-0.154
0.019
0.184
-0.060
0.290
-0.696

1.000
-0.019
-0.016
0.253
0.003
0.039
0.018
0.019
-0.245
0.011
-0.110
0.401

1.000
-0.063
-0.053
-0.042
-0.100
0.140
0.140
0.056
-0.062
-0.197
-0.085

1.000
0.777
0.946
0.688
-0.163
-0.163
-0.021
-0.140
0.086
0.041

1.000
0.697
0.605
-0.141
-0.141
-0.162
-0.097
-0.097
0.485

1.000
0.526
0.574
-0.097
-0.021
-0.106
0.069
-0.035

ESF

GNPG

LIQUID

AGROW

LLPROV

SIZE

1.000
-0.212
-0.043
-0.095
0.146
0.044

1.000
0.052
0.001
-0.118
-0.123

1.000
0.049
0.044
-0.114

1.000
0.023
0.055

1.000
-0.246

1.000

32

Table 3: Mean comparison of NII, NIM and ROA of the six banks (1982-2010)
This table presents the annual average net interest margin by assets (NIM), non-interest income by assets (NII) and return on assets (ROA) computed using
quarterly observations. The sample period for the before 1987 starts with the first quarter of 1982 and ends with the last quarter of 1986. The post 1997 period
starts with the first quarter of 1998 and ends in the third quarter of 2010. Numbers in parentheses are Student t-statistics for comparison of the current period
sample mean with that of the previous period. The signs ***, ** and * indicate significance levels at 1%, 5% and 10 %, respectively.
Bank
RBC

Before 1987
NIM
NII
ROA
0.0054
0.0008
0.0013

CIBC

0.0067

0.0020

0.0110

BNS

0.0062

0.0015

0.0013

TD

0.0076

0.0019

0.0020

BMO

0.0062

0.0021

0.0011

NB

0.0079

0.0022

0.0016

BIG 6

0.0066

0.0017

0.0030

NIM
0.0067***
(7.2769)
0.0065
(-1.1111)
0.0063
(0.8378)
0.0070***
(-2.4222)
0.0067***
(3.3649)
0.0066***
(-6.1055)
0.0066
(0.5303)

Between 1987 and 1997

NII
0.0025***
(8.6228)
0.0034***
(11.767)
0.0027***
(13.242)
0.0033***
(12.157)
0.0033***
(8.2306)
0.0035***
(10.888)
0.0031***
(18.253)

ROA
0.0016***
(2.1875)
0.0027***
(-13.527)
0.0016**
(2.0357)
0.0020
(0.3990)
0.0015***
(5.6683)
0.0012
(-1.7485)
0.0018***
(3.7970)

NIM
0.0041***
(-16.832)
0.0042***
(-16.6507)
0.0048***
(-9.8356)
0.0041***
(-11.010)
0.0042***
(-14.597)
0.0039***
(-16.295)
0.0042***
(32.1191)

Post 1997
NII
0.0054***
(13.213)
0.0049***
(4.5667)
0.0034***
(6.6125)
0.0042***
(5.5038)
0.0039***
(5.2621)
0.0051***
(7.4648)
0.0045***
(14.429)

ROA
0.0019**
(2.2177)
0.0012**
(-2.7753)
0.0021**
(3.3551)
0.0017*
(-1.5190)
0.0017**
(1.8953)
0.0017**
(2.0253)
0.0017
(0.6098)

33

Table 4: Determinants of NII and NIM

This table presents the estimation results for the determinants of NII and NIM using the System-GMM
approach. We use quarterly available financial statement data and daily market data from 1982 to 2010.
The dependent variables are non-interest income over total assets (NII) and net interest margin over total
assets (NIM). The dummy DEC captures the period of the impact of the 1987 amendment to the Bank
Act. REG1 is for the period of the amendment to the Bank Act following Basel I (i.e., 1988-1997). REG2
is for the period covering the amendment to the Bank Act following the 1996 amendment to Basel I and
Basel II periods (i.e. 1998-2010). The standard deviations of coefficients are given in parentheses. The
signs ***, ** and * represent, respectively, significance levels at 1%, 5% and 10%.
VARIABLES
Constant
NIIj,t-1

NII

NIM

0.0100**
(0.003)
0.6396***
(0.028)

0.0139***
(0.002)

NIMj,t-1

-0.2116**
(0.063)
0.0004**
(0.000)
0.0002**
(0.000)
0.0006
(0.000)
0.0068**
(0.002)
0.0128*
(0.005)
-0.0008**
(0.000)
-0.0116**
(0.004)
-0.0034**
(0.001)

0.4961***
(0.053)
-0.1486**
(0.056)
0.0002
(0.000)
0.0002
(0.000)
-0.0002
(0.000)
0.0010
(0.002)
0.0022
(0.002)
-0.0010***
(0.000)
-0.0004
(0.004)
-0.0046***
(0.000)
-0.1486**
(0.056)

606
6

606
6

74.0105
0.0001
0.0000
1.0000
-0.3371
0.7360
275.2402
0.0006

48.6192
0.0002
0.0000
1.0000
1.3482
0.1776
341.1613
0.0000

Yes

Yes

NIIj,t
NIMj,t
DECt
REG1t
REG2 t
CAPj,t
GNPGt
SIZEj,t
LIQUIDj,t
AGROWTHj,t
Number of Obs.
Number of banks
F-Statistic
P-value of F stat.
Hansen
P-value Hansen
AR2
P-value of AR2
Sargan statistic
P-value Sargan
Bank fixed effect

34

Table 5: Estimation results of the impact of non-interest income and regulatory changes on risk, returns and capital
This table presents the estimation results for the system of simultaneous equations (1, 2 and 3) of TRISK, ROA and CAP using the System-GMM. We use
quarterly available financial statements and daily market data from 1982 to 2010. The dependent variables are: the total risk (TRISK), the return on assets
(ROA) and the banks capital-to-RWA ratio (CAP). Event 1 tests the impact of the 1987 amendment to the Bank Act, event 2 tests the impact of the
amendment to the Bank Act following Basel I, and event 3 tests the impact of the amendment to the Bank Act following the 1996 amendment to Basel I and
Basel II. Event 1 is shown by regressions (1), (2) and (3), Event 2 by (4), (5) and (6) and Event 3 by (7), (8) and (9). Corresponding dummy variables for these
events are DEC, REG1 and REG2 respectively. The standard deviation of coefficients is given in parentheses. The stars ***, ** and * represent respectively
significance levels at 1%, 5% and 10%.

VARIABLES
Constant
TRISKj,t-1

(1)
TRISK

(2)
ROA

(3)
CAP

(4)
TRISK

(5)
ROA

(6)
CAP

(7)
TRISK

(8)
ROA

(9)
CAP

0.037**
(0.01)
0.351***
(0.09)

-0.004
(0.00)

-0.134
(0.16)

0.044***
(0.01)

0.004
(0.00)

-0.375*
(0.17)

0.056***
(0.01)

0.005
(0.00)

-0.326
(0.16)

ROAj,t-1

0.357**
(0.09)
0.639***
(0.05)

CAPj,t-1
NIIj,t
NIMj,t
CAPj,t

0.625***
(0.04)
0.454***
(0.16)

-0.596**
(0.21)
-1.326***
(0.24)

0.302***
(0.06)
0.385**
(0.12)

2.108
(2.55)
4.225
(2.96)

0.030
(0.02)

TRISKj,t

DECt

0.354**
(0.09)

-0.002*
(0.00)

0.682***
(0.07)
0.456**
(0.16)

-0.594*
(0.24)
-1.130**
(0.30)

0.285**
(0.08)
0.356*
(0.15)

2.716
(2.49)
6.123
(3.91)

0.026
(0.02)
0.008
(0.00)

0.159
(0.22)

-0.001
(0.00)

0.006
(0.00)

0.454**
(0.17)

-0.694*
(0.29)
-1.310***
(0.27)

0.209**
(0.06)
0.201**
(0.05)

2.530
(2.24)
7.264
(3.65)

0.012*
(0.01)

0.113
(0.21)

0.024
(0.03)

0.006
(0.01)

0.131
(0.20)

Continues on the next page

35

Table 5 (Continued)
VARIABLES
REG1t

TRISK

ROA

CAP

TRISK
-0.001
(0.00)

ROA
-0.001
(0.00)

CAP
-0.002
(0.01)

REG2t
GNPGt
SIZEj,t
LIQUIDj,t
AGROWTHj,t
LLPROVj,t
SUBPRIMEt

Observations
Number of banks
F-Statistic
P-value of F stat.
Hansen
P-value Hansen
AR2
P-value of AR2
Sargan statistic
P-value Sargan
Bank fixed effect

-0.128***
(0.02)
-0.002
(0.00)
0.007
(0.03)
-0.031
(0.02)
0.381
(0.19)
0.003
(0.00)

0.002
(0.00)
0.000
(0.00)
0.008
(0.01)
-0.002
(0.00)
-0.324***
(0.04)
0.001*
(0.00)

-0.346*
(0.15)
0.033*
(0.01)
1.055*
(0.42)
0.022
(0.03)
-0.028
(0.57)
-0.019*
(0.01)

-0.125***
(0.02)
-0.003*
(0.00)
0.025
(0.03)
-0.027
(0.02)
0.349
(0.20)
0.004*
(0.00)

0.003
(0.00)
-0.001
(0.00)
0.010
(0.01)
0.001
(0.00)
-0.366***
(0.04)
0.001*
(0.00)

-0.429**
(0.15)
0.038**
(0.01)
1.099**
(0.43)
0.030
(0.03)
-0.048
(0.58)
-0.022*
(0.01)

606
6
28.89
0.00
0.00
1.00
1.69
0.09
359.29
0.00
Yes

606
6
348.70
0.00
0.00
1.00
1.61
0.11
433.88
0.00
Yes

606
6
11.37
0.01
0.00
1.00
0.71
0.48
313.64
0.00
Yes

606
6

606
6

606
6

9.71
0.01

503.06
0.00

28.51
0.00

0.00
1.00

0.00
1.00

0.00
1.00

1.72
0.08
360.74

1.85
0.06
422.62

0.63
0.53
291.20

0.00
Yes

0.00
Yes

0.00
Yes

TRISK

ROA

CAP

0.002
(0.00)
-0.119***
(0.02)
-0.004***
(0.00)
0.035
(0.04)
-0.026
(0.02)
0.356
(0.21)
0.004*
(0.00)

0.000
(0.00)
0.010
(0.01)
-0.001
(0.00)
0.004
(0.01)
-0.002
(0.00)
-0.358***
(0.03)
0.001
(0.00)

0.014
(0.01)
-0.456**
(0.14)
0.032*
(0.01)
1.213**
(0.46)
0.054
(0.04)
-0.205
(0.59)
-0.018
(0.01)

606
6
33.43
0.00
0.00
1.00
1.74
0.08
367.89
0.00
Yes

606
6
828.62
0.00
0.00
1.00
1.79
0.07
414.44
0.00
Yes

606
6
12.68
0.01
0.00
1.00
0.77
0.44
309.72
0.00
Yes

36

Table 6: Robustness check with the Idiosyncratic Risk (IRISK) as an alternative risk measure
This table presents the estimation results for the system of simultaneous equations (1, 2 and 3) of IRISK, ROA and CAP using the System GMM. We use
quarterly available financial statements and daily market data from 1982 to 2010. The dependent variables are: the idiosyncratic risk (IRISK), the return on
assets (ROA) and the banks capital-to-RWA ratio (CAP). Event 1 tests the impact of the 1987 amendment to the Bank Act, event 2 tests the impact of the
amendment to the Bank Act following Basel I, and event 3 tests the impact of the amendment to the Bank Act following the 1996 amendment to Basel I and
Basel II. Event 1 is shown by regressions (1), (2) and (3), Event 2 by (4), (5) and (6) and Event 3 by (7), (8) and (9). Corresponding dummy variables for these
events are DEC, REG1 and REG2 respectively. The standard deviation of coefficients is given in parentheses. The stars ***, ** and * represent respectively
significance levels at 1%, 5% and 10%.
(1)
IRISK

(2)
ROA

(3)
CAP

(4)
IRISK

(5)
ROA

(6)
CAP

(7)
IRISK

(8)
ROA

(9)
CAP

Constant

0.043***
(0.01)

-0.004
(0.00)

-0.314
(0.16)

0.049***
(0.01)

0.004
(0.00)

-0.373*
(0.17)

0.062***
(0.01)

0.004
(0.00)

-0.321
(0.16)

IRISKj,t-1

0.263**
(0.08)

VARIABLES

ROAj,t-1

0.263**
(0.08)
0.638***
(0.05)

CAPj,t-1
NIIj,t
NIMj,t
CAPj,t

0.623***
(0.08)
0.457**
(0.16)

-0.239
(0.24)
-1.555**
(0.46)

0.300***
(0.06)
0.385**
(0.12)

2.021
(2.51)
4.165
(2.97)

0.011
(0.01)

IRISKj,t
DECt

0.259**
(0.08)

-0.002**
(0.00)

-0.194
(0.26)
-1.298**
(0.36)

0.284**
(0.08)
0.351*
(0.15)

0.682***
(0.07)

0.459**
(0.16)
2.637
(2.46)
6.045
(3.89)

0.009
(0.01)
0.003
(0.00)

0.043
(0.17)

-0.001
(0.00)

0.006
(0.00)

0.456**
(0.16)

-0.316
(0.31)
-1.365**
(0.37)

0.204**
(0.06)
0.199**
(0.05)

2.454
(2.23)
7.142
(3.60)

0.011
(0.01)

0.048
(0.19)

0.007
(0.02)
0.001
(0.01)

0.085
(0.20)

Continues on the next page

37

Table 6 (Continued)
VARIABLES

IRISK

ROA

CAP

REG1t

IRISK

ROA

CAP

-0.001
(0.00)

-0.001
(0.00)

-0.002
(0.01)

REG2t
GNPGt
SIZEj,t
LIQUIDj,t
AGROWTHj,t
LLPROVj,t
SUBPRIMEt

Observations
Number of banks
F-Statistic
P-value of F stat.
Hansen
P-value Hansen
AR2
P-value of AR2
Sargan statistic
P-value Sargan
Bank fixed effect

IRISK

ROA

CAP

0.003
(0.00)

0.000
(0.00)

0.014
(0.01)

-0.089**
(0.03)
-0.002**
(0.00)
0.012
(0.02)
-0.028*
(0.01)
0.344**
(0.10)
0.001
(0.00)

0.001
(0.00)
0.000
(0.00)
0.005
(0.01)
-0.002
(0.00)
-0.348***
(0.03)
0.001*
(0.00)

-0.360*
(0.16)
0.033*
(0.01)
1.055*
(0.42)
0.017
(0.03)
0.051
(0.54)
-0.018*
(0.01)

-0.096**
(0.03)
-0.003***
(0.00)
0.037
(0.03)
-0.023*
(0.01)
0.301**
(0.11)
0.002
(0.00)

0.002
(0.00)
-0.001
(0.00)
0.010
(0.01)
0.000
(0.00)
-0.361***
(0.04)
0.001*
(0.00)

-0.440**
(0.16)
0.038**
(0.01)
1.098**
(0.43)
0.026
(0.03)
0.018
(0.54)
-0.021*
(0.01)

-0.093**
(0.03)
-0.004***
(0.00)
0.057
(0.03)
-0.021*
(0.01)
0.291*
(0.12)
0.002
(0.00)

0.009
(0.01)
-0.001
(0.00)
0.005
(0.01)
-0.002
(0.00)
-0.354***
(0.03)
0.001
(0.00)

-0.468**
(0.15)
0.032*
(0.01)
1.213**
(0.46)
0.049
(0.04)
-0.136
(0.54)
-0.018
(0.01)

606
6

606
6

606
6

606
6

606
6

606
6

606
6

606
6

606
6

32.66
0.00
0.00
1.00
2.12
0.03
319.78
0.00

371.53
0.00
0.00
1.00
1.60
0.11
433.81
0.00

13.33
0.00
0.00
1.00
0.73
0.47
314.13
0.00

7.47
0.02
0.00
1.00
2.13
0.03
323.78
0.00

170.93
0.00
0.00
1.00
1.80
0.07
443.79
0.00

3.41
0.09
0.00
1.00
0.69
0.49
306.81
0.00

9.38
0.01
0.00
1.00
2.11
0.03
322.47
0.00

436.09
0.00
0.00
1.00
1.84
0.07
421.98
0.00

54.39
0.00
0.00
1.00
0.64
0.52
292.05
0.00

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

38

Table 7: Robustness check with the Implicit Assets Volatility (ARISK) as an alternative risk measure
This table presents the estimation results for the system of simultaneous equations (1, 2 and 3) of ARISK, ROA and CAP using the System GMM. We use
quarterly available financial statements and daily market data from 1982 to 2010. The dependent variables are: the implicit assets volatility (ARISK), the
return on assets (ROA) and the banks capital ratio (CAP). Event 1 tests the impact of the 1987 amendment to the Bank Act, event 2 tests the impact of the
amendment to the Bank Act following Basel I, and event 3 tests the impact of the amendment to the Bank Act following the 1996 amendment to Basel I and
Basel II. Event 1 is shown by regressions (1), (2) and (3), Event 2 by (4), (5) and (6) and Event 3 by (7), (8) and (9). Corresponding dummy variables for these
events are DEC, REG1 and REG2 respectively. The standard deviation of coefficients is given in parentheses. The stars ***, ** and * represent respectively
significance levels at 1%, 5% and 10%.

VARIABLES
Constant
ARISKj,t-1

(1)
ARISK

(2)
ROA

(3)
CAP

(4)
ARISK

(5)
ROA

(6)
CAP

(7)
ARISK

(8)
ROA

(9)
CAP

-0.016
(0.01)
0.397***
(0.05)

-0.004
(0.00)

-0.306
(0.16)

-0.014
(0.01)

0.004
(0.00)

-0.366*
(0.16)

0.003
(0.01)

0.005
(0.00)

-0.318
(0.16)

ROAj,t-1

0.391***
(0.05)
0.636***
(0.05)

CAPj,t-1
NIIj,t
NIMj,t
CAPj,t

0.624***
(0.04)
0.457**
(0.16)

0.134
(0.43)
-0.643*
(0.31)

0.293***
(0.06)
0.391**
(0.12)

2.016
(2.52)
4.032
(2.94)

-0.004
(0.02)

ARISKj,t
DECj,t

0.378***
(0.05)

-0.001
(0.00)

0.679***
(0.07)
0.459**
(0.16)

0.159
(0.44)
-0.398
(0.32)

0.278**
(0.09)
0.356*
(0.15)

2.631
(2.47)
5.932
(3.80)

-0.006
(0.02)

0.016**
(0.01)
-0.001
(0.00)

0.077
(0.28)
0.006
(0.00)

0.456**
(0.16)

0.058
(0.45)
-0.376
(0.31)

0.199**
(0.07)
0.193**
(0.06)

2.443
(2.26)
7.050
(3.50)

0.018*
(0.01)

-0.016
(0.25)

-0.010
(0.02)
0.010
(0.01)

0.049
(0.26)

Continues on the next page

39

Table 7 (Continued)
VARIABLES

ARISK

ROA

CAP

REG1t

ARISK

ROA

CAP

-0.001*
(0.00)

-0.001
(0.00)

-0.002
(0.01)

REG2t
GNPGt
SIZEj,t
LIQUIDj,t
AGROWTHj,t
LLPROVj,t
SUBPRIMEt

Observations
F-Statistic
P-value of F stat.
Hansen
P-value Hansen
AR2
P-value of AR2
Sargan statistic
P-value Sargan
Bank fixed effect

-0.091**
(0.03)
0.002
(0.00)
0.019
(0.02)
-0.033**
(0.01)
0.271**
(0.10)
0.002
(0.00)

0.002
(0.00)
0.000
(0.00)
0.006
(0.01)
-0.001
(0.00)
-0.358***
(0.03)
0.001*
(0.00)

-0.367*
(0.16)
0.032*
(0.01)
1.057*
(0.42)
0.017
(0.03)
0.049
(0.54)
-0.018*
(0.01)

-0.100**
(0.03)
0.002
(0.00)
0.040
(0.02)
-0.030**
(0.01)
0.251**
(0.09)
0.002
(0.00)

0.003
(0.00)
-0.001
(0.00)
0.010
(0.01)
0.001
(0.00)
-0.369***
(0.04)
0.001*
(0.00)

-0.446**
(0.16)
0.037**
(0.01)
1.099*
(0.43)
0.025
(0.03)
0.023
(0.55)
-0.021*
(0.01)

ARISK

ROA

CAP

0.004**
(0.00)

0.000
(0.00)

0.014
(0.01)

-0.096**
(0.03)
0.000
(0.00)
0.066*
(0.03)
-0.025*
(0.01)
0.245**
(0.08)
0.003
(0.00)

0.010
(0.01)
-0.001
(0.00)
0.005
(0.01)
-0.002
(0.00)
-0.360***
(0.03)
0.001
(0.00)

-0.475**
(0.15)
0.031*
(0.01)
1.214**
(0.46)
0.048
(0.04)
-0.106
(0.56)
-0.017
(0.01)

606

606

606

606

606

606

606

606

606

27.26
0.00
0.00
1.00
0.79
0.43
412.72
0.00

358.55
0.00
0.00
1.00
1.62
0.10
432.90
0.00

10.04
0.01
0.00
1.00
0.73
0.46
314.82
0.00

32.09
0.00
0.00
1.00
0.79
0.43
415.20
0.00

711.90
0.00
0.00
1.00
1.82
0.07
442.61
0.00

5.54
0.03
0.00
1.00
0.70
0.49
307.43
0.00

34.72
0.00
0.00
1.00
0.77
0.44
416.45
0.00

902.18
0.00
0.00
1.00
1.86
0.06
421.44
0.00

34.19
0.00
0.00
1.00
0.65
0.52
292.53
0.00

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

40

Table 8: Estimation results of the impact of non-interest income and regulatory changes on risk, returns and capital
This table presents the estimation results for the system of simultaneous equations (1, 2 and 3) of VAR, ROA and CAP using the System-GMM. We use
quarterly available financial statements and daily market data from 1982 to 2010. The dependent variables are: value at risk (VAR), the return on assets
(ROA) and the banks capital-to-RWA ratio (CAP). Event 1 tests the impact of the 1987 amendment to the Bank Act, event 2 tests the impact of the
amendment to the Bank Act following Basel I, and event 3 tests the impact of the amendment to the Bank Act following the 1996 amendment to Basel I and
Basel II. Event 1 is shown by regressions (1), (2) and (3), Event 2 by (4), (5) and (6) and Event 3 by (7), (8) and (9). Corresponding dummy variables for these
events are DEC, REG1 and REG2 respectively. The standard deviation of coefficients is given in parentheses. The stars ***, ** and * represent respectively
significance levels at 1%, 5% and 10%.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
VARIABLES
VAR
ROA
CAP
VAR
ROA
CAP
VAR
ROA
CAP
Constant
VARj,t-1

0.315**
(0.09)
0.494***
(0.04)

ROAj,t-1

-0.004
(0.00)

NIMj,t
CAPj,t

0.639***
(0.05)

0.004
(0.00)

-7.404**
(2.80)
-12.545**
(3.12)

0.303***
(0.06)
0.383**
(0.12)

0.056***
(0.01)

0.625***
(0.04)

2.147
(2.53)
4.177
(2.87)

0.030
(0.02)

-0.002*
(0.00)

-0.375*
(0.17)

0.456**
(0.16)

-0.594*
(0.24)
-1.130**
(0.30)

0.159
(0.22)

-0.001
(0.00)

0.006
(0.00)

-0.326
(0.16)

0.682***
(0.07)

0.285**
(0.08)
0.356*
(0.15)

2.716
(2.49)
6.123
(3.91)

0.026
(0.02)
0.008
(0.00)

0.005
(0.00)

0.354**
(0.09)

0.454***
(0.16)

VARj,t

DECt

0.044***
(0.01)
0.357**
(0.09)

CAPj,t-1
NIIj,t

-0.313
(0.16)

0.454**
(0.17)

-0.694*
(0.29)
-1.310***
(0.27)

0.209**
(0.06)
0.201**
(0.05)

2.530
(2.24)
7.264
(3.65)

0.012*
(0.01)

0.113
(0.21)

0.024
(0.03)

0.006
(0.01)

0.131
(0.20)

41

Continues on the next page

Table 8 (Continued)
VARIABLES
REG1t

VAR

ROA

CAP

VAR
-0.001
(0.00)

ROA
-0.001
(0.00)

CAP
-0.002
(0.01)

REG2t
GNPGt
SIZEj,t
LIQUIDj,t
AGROWTHj,t
LLPROVj,t
SUBPRIMEt

Observations
Number of banks
F-Statistic
P-value of F stat.
Hansen
P-value Hansen
AR2
P-value of AR2
Sargan statistic
P-value Sargan
Bank fixed effect

-0.128***
(0.02)
-0.002
(0.00)
0.007
(0.03)
-0.031
(0.02)
0.381
(0.19)
0.003
(0.00)

0.002
(0.00)
0.000
(0.00)
0.008
(0.01)
-0.002
(0.00)
-0.324***
(0.04)
0.001*
(0.00)

-0.346*
(0.15)
0.033*
(0.01)
1.055*
(0.42)
0.022
(0.03)
-0.028
(0.57)
-0.019*
(0.01)

-0.125***
(0.02)
-0.003*
(0.00)
0.025
(0.03)
-0.027
(0.02)
0.349
(0.20)
0.004*
(0.00)

0.003
(0.00)
-0.001
(0.00)
0.010
(0.01)
0.001
(0.00)
-0.366***
(0.04)
0.001*
(0.00)

-0.429**
(0.15)
0.038**
(0.01)
1.099**
(0.43)
0.030
(0.03)
-0.048
(0.58)
-0.022*
(0.01)

606
6
28.89
0.00
0.00
1.00
1.69
0.09
359.29
0.00
Yes

606
6
348.70
0.00
0.00
1.00
1.61
0.11
433.88
0.00
Yes

606
6
11.37
0.01
0.00
1.00
0.71
0.48
313.64
0.00
Yes

606
6

606
6

606
6

9.71
0.01

503.06
0.00

28.51
0.00

0.00
1.00

0.00
1.00

0.00
1.00

1.72
0.08
360.74

1.85
0.06
422.62

0.63
0.53
291.20

0.00
Yes

0.00
Yes

0.00
Yes

VAR

ROA

CAP

0.002
(0.00)
-0.119***
(0.02)
-0.004***
(0.00)
0.035
(0.04)
-0.026
(0.02)
0.356
(0.21)
0.004*
(0.00)

0.000
(0.00)
0.010
(0.01)
-0.001
(0.00)
0.004
(0.01)
-0.002
(0.00)
-0.358***
(0.03)
0.001
(0.00)

0.014
(0.01)
-0.456**
(0.14)
0.032*
(0.01)
1.213**
(0.46)
0.054
(0.04)
-0.205
(0.59)
-0.018
(0.01)

606
6
33.43
0.00
0.00
1.00
1.74
0.08
367.89
0.00
Yes

606
6
828.62
0.00
0.00
1.00
1.79
0.07
414.44
0.00
Yes

606
6
12.68
0.01
0.00
1.00
0.77
0.44
309.72
0.00
Yes

42

Table 10: Robustness check with the Inverse Leverage Capital Ratio (ILEV) as not risk-sensitive capital measure
This table presents the estimation results for the system of simultaneous equations (1, 2 and 3) of TRISK, ROA and ILEV using the System GMM. We use
quarterly available financial statements and daily market data from 1982 to 2010. The dependent variables are: the total risk (TRISK), the return on assets
(ROA) and the inverse leverage capital ratio (ILEV). Event 1 tests the impact of the 1987 amendment to the Bank Act, event 2 tests the impact of the
amendment to the Bank Act following Basel I, and event 3 tests the impact of the amendment to the Bank Act following the 1996 amendment to Basel I and
Basel II. Event 1 is shown by regressions (1), (2) and (3), Event 2 by (4), (5) and (6) and Event 3 by (7), (8) and (9). Corresponding dummy variables for these
events are DEC, REG1 and REG2 respectively. The standard deviation of coefficients is given in parentheses. The stars ***, ** and * represent respectively
significance levels at 1%, 5% and 10%.

VARIABLES
TRISKj,t-1

(1)
TRISK

(2)
ROA

0.353**
(0.09)

ROAj,t-1

NIMj,t
ILEVj,t

0.694***
(0.04)

-0.415
(0.23)
-0.805**
(0.31)
-0.084
(0.07)

TRISKj,t
DECt

(4)
TRISK

-0.001
(0.00)

(5)
ROA

(6)
ILEV

0.356**
(0.09)

ILEVj,t-1
NIIj,t

(3)
ILEV

(7)
TRISK

0.319***
(0.04)
0.408**
(0.14)

0.004
(0.01)

0.029
(0.01)

-0.001
(0.00)

0.001
(0.00)

-0.373
(0.28)
-0.333
(0.34)
-0.103
(0.08)

(9)
ILEV

0.354**
(0.09)
0.705***
(0.04)

0.847***
(0.03)
0.054
(0.15)
0.280**
(0.10)

(8)
ROA

0.753***
(0.07)

0.263***
(0.05)
0.506
(0.25)

0.858***
(0.03)
0.105
(0.13)
0.257**
(0.10)

0.004
(0.01)

0.028
(0.01)

-0.486
(0.30)
-0.245
(0.36)
-0.134
(0.09)

0.198***
(0.03)
0.282**
(0.09)

0.859***
(0.03)
0.121
(0.13)
0.310*
(0.15)

0.010*
(0.00)

0.027
(0.01)

Continues on the next page

43

Table 10 (Continued)
VARIABLES

TRISK

ROA

ILEV

REG1t

TRISK

ROA

ILEV

-0.001*
(0.00)

-0.001
(0.00)

0.000
(0.00)

REG2t
GNPGt
SIZEj,t
LIQUIDj,t
AGROWTHj,t
LLPROVj,t
SUBPRIMEt
Constant

Observations
Number of banks
F-Statistic
P-value of F stat.
Hansen
P-value Hansen
AR2
P-value of AR2
Sargan statistic
P-value Sargan
Bank fixed effect

TRISK

ROA

ILEV

0.002
(0.00)

0.000
(0.00)

0.000
(0.00)

-0.146***
(0.02)
0.000
(0.00)
0.041
(0.02)
-0.034
(0.02)
0.336*
(0.16)
0.002**
(0.00)
0.014
(0.01)

0.003
(0.00)
0.000
(0.00)
0.008
(0.01)
-0.002
(0.00)
-0.324***
(0.04)
0.001*
(0.00)
-0.006
(0.00)

-0.035**
(0.01)
0.000
(0.00)
-0.007
(0.02)
-0.031***
(0.00)
0.055
(0.14)
0.001
(0.00)
0.003
(0.00)

-0.149***
(0.02)
0.000
(0.00)
0.054*
(0.02)
-0.030
(0.02)
0.304
(0.16)
0.002**
(0.00)
0.013*
(0.01)

0.005
(0.00)
-0.000
(0.00)
0.012
(0.01)
-0.000
(0.00)
-0.336***
(0.05)
0.001
(0.00)
-0.002
(0.00)

-0.040**
(0.01)
0.000
(0.00)
-0.007
(0.02)
-0.031***
(0.00)
0.054
(0.14)
0.001
(0.00)
0.001
(0.00)

-0.141***
(0.03)
-0.000
(0.00)
0.060*
(0.03)
-0.031
(0.02)
0.303
(0.17)
0.002**
(0.00)
0.018**
(0.01)

0.013
(0.01)
-0.000
(0.00)
0.006
(0.01)
-0.003
(0.00)
-0.321***
(0.04)
0.001
(0.00)
-0.001
(0.00)

-0.042**
(0.01)
0.000
(0.00)
-0.004
(0.02)
-0.030***
(0.00)
0.051
(0.14)
0.001
(0.00)
0.001
(0.00)

606
6
21.70
0.00
0.00
1.00
1.85
0.06
365.77
0.00
Yes

606
6
537.86
0.00
0.00
1.00
1.64
0.10
433.96
0.00
Yes

606
6
1029.91
0.00
0.00
1.00
1.01
0.31
272.96
0.00
Yes

606
6
1.78
0.27
0.00
1.00
1.91
0.06
369.67
0.00
Yes

606
6
389.40
0.00
0.00
1.00
1.74
0.08
432.25
0.00
Yes

606
6
22.00
0.00
0.00
1.00
1.04
0.30
272.15
0.00
Yes

606
6
42.66
0.00
0.00
1.00
1.92
0.05
369.16
0.00
Yes

606
6
828.62
0.00
0.00
1.00
1.79
0.07
414.44
0.00
Yes

606
6
43.23
0.00
0.00
1.00
1.04
0.30
271.99
0.00
Yes

44

Table 11: Robustness check with the market equity returns RET as marked to market performance measure
This table presents the estimation results for the system of simultaneous equations (1, 2 and 3) of TRISK, RET and CAP using the System GMM. We use
quarterly available financial statements and daily market data from 1982 to 2010. The dependent variables are: the total risk (TRISK), the stock returns (RET)
and the banks capital ratio (CAP). Event 1 tests the impact of the 1987 amendment to the Bank Act, event 2 amendment to the Banking following Basel I, and
event 3 amendment to the Banking following the 1996 amendment to Basel I and Basel II. Event 1 is shown by regressions (1), (2) and (3), Event 2 by (4), (5)
and (6) and Event 3 by (7), (8) and (9). Corresponding dummy variables for these events are DEC, REG1 and REG2 respectively. The standard deviation of
coefficients is given in parentheses. The stars ***, ** and * represent respectively significance levels at 1%, 5% and 10%.

VARIABLES
TRISKj,t-1

(1)
TRISK

(2)
RET

0.352***
(0.09)

RETj,t-1

NIMj,t
CAPj,t

-0.006
(0.07)

-0.596***
(0.13)
-1.048***
(0.19)
0.024
(0.02)

TRISKj,t
DECt

(4)
TRISK

-0.002**
(0.00)

(5)
RET

(6)
CAP

0.358**
(0.09)

CAPj,t-1
NIIj,t

(3)
CAP

(7)
TRISK

30.988***
(4.54)
34.552*
(13.70)

2.473*
(1.08)

0.121
(0.19)

-0.038**
(0.01)

0.010**
(0.00)

-0.603**
(0.16)
-0.662*
(0.29)
0.013
(0.02)

(9)
CAP

0.358**
(0.09)
-0.003
(0.07)

0.541***
(0.15)
3.063
(2.70)
0.406
(2.41)

(8)
RET

-0.011
(0.07)

26.403***
(5.33)
30.277*
(12.52)

0.567**
(0.15)
3.990
(2.84)
1.272
(3.73)

2.760**
(1.02)

0.075
(0.17)

-0.726**
(0.20)
-0.889**
(0.33)
0.008
(0.02)

27.922***
(4.44)
20.427
(10.64)

0.546**
(0.16)
3.936
(2.59)
4.546
(4.07)

2.915**
(1.06)

0.060
(0.19)

Continues on the next page

45

Table 11 (Continued)
VARIABLES

TRISK

RET

CAP

REG1t

TRISK

RET

CAP

-0.001*
(0.00)

0.009
(0.01)

-0.000
(0.01)

REG2t
GNPGt
SIZEj,t
LIQUIDj,t
AGROWTHj,t
LLPROVj,t
SUBPRIMEt
Constant

Observations
Number of banks
F-Statistic
P-value of F stat.
Hansen
P-value Hansen
AR2
P-value of AR2
Sargan statistic
P-value Sargan
Bank fixed effect

TRISK

RET

CAP

0.001
(0.00)

-0.057***
(0.01)

0.016
(0.01)

-0.128***
(0.02)
-0.000
(0.00)
0.010
(0.04)
-0.032
(0.02)
0.370**
(0.17)
0.001*
(0.00)
0.021***
(0.01)

-1.003
(0.66)
0.029
(0.02)
0.246
(0.20)
0.743**
(0.19)
-11.143***
(2.51)
0.008
(0.01)
-0.616
(0.36)

-0.356*
(0.17)
0.015
(0.01)
0.752**
(0.27)
0.035
(0.04)
-0.393
(0.69)
-0.003
(0.01)
-0.138
(0.12)

-0.127***
(0.02)
-0.001
(0.00)
0.037
(0.04)
-0.028
(0.02)
0.335
(0.18)
0.002
(0.00)
0.022***
(0.00)

-0.362
(0.64)
0.015
(0.02)
0.179
(0.25)
0.722**
(0.19)
-11.011***
(2.69)
0.010
(0.01)
-0.449
(0.30)

-0.469**
(0.17)
0.018
(0.01)
0.749**
(0.28)
0.043
(0.04)
-0.438
(0.71)
-0.004
(0.01)
-0.172
(0.13)

-0.116***
(0.03)
-0.001
(0.00)
0.039
(0.03)
-0.030
(0.02)
0.353
(0.19)
0.002*
(0.00)
0.027***
(0.00)

-0.284
(0.61)
0.028
(0.02)
-0.305
(0.26)
0.598**
(0.19)
-10.340**
(2.91)
0.004
(0.01)
-0.509
(0.31)

-0.517**
(0.15)
0.015
(0.01)
0.929**
(0.30)
0.076
(0.05)
-0.645
(0.76)
-0.003
(0.01)
-0.165
(0.13)

606
6
9.60
0.01
0.00
1.00
1.74
0.08
364.13
0.00
Yes

606
6
10.85
0.01
0.00
1.00
-1.72
0.09
412.93
0.00
Yes

606
6
2.77
0.14
0.00
1.00
0.85
0.14
331.44
0.00
Yes

606
6
159.67
0.00
0.00
1.00
1.77
0.08
369.24
0.00
Yes

606
6
9.86
0.01
0.00
1.00
-1.69
0.09
418.96
0.00
Yes

606
6
1.54
0.33
0.00
1.00
0.84
0.40
326.43
0.00
Yes

606
6
33.43
0.00
0.00
1.00
1.74
0.08
367.89
0.00
Yes

606
6
8.05
0.02
0.00
1.00
-1.76
0.08
420.66
0.00
Yes

606
6
12.68
0.01
0.00
1.00
0.77
0.44
309.72
0.00
Yes

46

Table 12: Robustness check with Tobins Q (QTOB) as hybrid performance measure
This table presents the estimation results for the system of simultaneous equations (1, 2 and 3) of TRISK, QTOB and CAP using the System GMM. We use
quarterly available financial statements and daily market data from 1982 to 2010. The dependent variables are: the total risk (TRISK), the Tobins Q (QTOB)
and the banks capital ratio (CAP). Event 1 tests the impact of the 1987 amendment to the Bank Act, event 2 amendment to the Banking following Basel I, and
event 3 amendment to the Banking following the 1996 amendment to Basel I and Basel II. Event 1 is shown by regressions (1), (2) and (3), Event 2 by (4), (5)
and (6) and Event 3 by (7), (8) and (9). Corresponding dummy variables for these events are DEC, REG1 and REG2 respectively. The standard deviation of
coefficients is given in parentheses. The stars ***, ** and * represent respectively significance levels at 1%, 5% and 10%.

VARIABLES
TRISKj,t-1

(1)
TRISK

(2)
QTOB

0.352***
(0.09)

QTOBj,t-1

NIMj,t
CAPj,t

0.785***
(0.04)

-0.596***
(0.13)
-1.048***
(0.19)
0.024
(0.02)

TRISKj,t
DECt

(4)
TRISK

-0.002**
(0.00)

(5)
QTOB

(6)
CAP

0.358**
(0.09)

CAPj,t-1
NIIj,t

(3)
CAP

(7)
TRISK

43.170***
(6.30)
3.321
(13.00)

-3.498**
(1.05)

0.121
(0.19)

-0.084***
(0.01)

0.010**
(0.00)

-0.603**
(0.16)
-0.662*
(0.29)
0.013
(0.02)

(9)
CAP

0.358**
(0.09)
0.789***
(0.04)

0.541***
(0.15)
3.063
(2.70)
0.406
(2.41)

(8)
QTOB

0.802***
(0.04)

36.133***
(6.33)
4.090
(14.83)

0.567**
(0.15)
3.990
(2.84)
1.272
(3.73)

-3.220**
(1.17)

0.075
(0.17)

-0.726**
(0.20)
-0.889**
(0.33)
0.008
(0.02)

34.237***
(6.03)
-8.819
(16.64)

0.546**
(0.16)
3.936
(2.59)
4.546
(4.07)

-2.723*
(1.10)

0.060
(0.19)

Continues on the next page

47

Table 12 (Continued)
VARIABLES
REG1t

TRISK

QTOB

CAP

TRISK
-0.001*
(0.00)

QTOB
-0.031
(0.02)

CAP
-0.000
(0.01)

REG2t
GNPGt
SIZEj,t
LIQUIDj,t
AGROWTHj,t
LLPROVj,t
SUBPRIMEt
Constant

Observations
Number of banks
F-Statistic
P-value of F stat.
Hansen
P-value Hansen
AR2
P-value of AR2
Sargan statistic
P-value Sargan
Bank fixed effect

TRISK

QTOB

CAP

0.001
(0.00)

-0.028
(0.04)

0.016
(0.01)

-0.128***
(0.02)
-0.000
(0.00)
0.010
(0.04)
-0.032
(0.02)
0.370**
(0.17)
0.001*
(0.00)
0.021***
(0.01)

0.744
(0.48)
0.096**
(0.03)
-0.122
(0.74)
0.616*
(0.27)
-11.085
(5.54)
-0.042*
(0.02)
-0.871**
(0.33)

-0.356*
(0.17)
0.015
(0.01)
0.752**
(0.27)
0.035
(0.04)
-0.393
(0.69)
-0.003
(0.01)
-0.138
(0.12)

-0.127***
(0.02)
-0.001
(0.00)
0.037
(0.04)
-0.028
(0.02)
0.335
(0.18)
0.002
(0.00)
0.022***
(0.00)

1.363**
(0.36)
0.066**
(0.02)
0.083
(0.66)
0.673*
(0.27)
-11.312*
(5.07)
-0.036
(0.02)
-0.575
(0.30)

-0.469**
(0.17)
0.018
(0.01)
0.749**
(0.28)
0.043
(0.04)
-0.438
(0.71)
-0.004
(0.01)
-0.172
(0.13)

-0.116***
(0.03)
-0.001
(0.00)
0.039
(0.03)
-0.030
(0.02)
0.353
(0.19)
0.002*
(0.00)
0.027***
(0.00)

1.728***
(0.40)
0.067**
(0.02)
-0.485
(0.97)
0.506
(0.28)
-9.812*
(4.64)
-0.042*
(0.02)
-0.518*
(0.24)

-0.517**
(0.15)
0.015
(0.01)
0.929**
(0.30)
0.076
(0.05)
-0.645
(0.76)
-0.003
(0.01)
-0.165
(0.13)

606
6
9.60
0.01
0.00
1.00
1.74
0.08
364.13
0.00
Yes

606
6
150.22
0.00
0.00
1.00
-0.52
0.61
446.12
0.00
Yes

606
6
2.77
0.14
0.00
1.00
0.85
0.14
331.44
0.00
Yes

606
6
159.67
0.00
0.00
1.00
1.77
0.08
369.24
0.00
Yes

606
6
5.73
0.03
0.00
1.00
-0.45
0.66
451.40
0.00
Yes

606
6
1.54
0.33
0.00
1.00
0.84
0.40
326.43
0.00
Yes

606
6
33.43
0.00
0.00
1.00
1.74
0.08
367.89
0.00
Yes

606
6
5.40
0.04
0.00
1.00
-0.55
0.58
454.67
0.00
Yes

606
6
12.68
0.01
0.00
1.00
0.77
0.44
309.72
0.00
Yes

48