Banks have increased revenues from service charges since financial crisis, find Cleveland Fed researchers

Banks have increased their revenues from service charges since the financial crisis, according to new research by the Federal Reserve Bank of Cleveland. This increase in service charges has helped some banks make up for drops in their largest source of revenue—interest income from loans, which has been impacted by the low interest rate environment that has prevailed over the past decade.

In a new Economic Commentary, Cleveland Fed researchers, Joseph Haubrich and Tristan Young, document how noninterest income and its components, including service charges, have changed over time, particularly in response to the financial crisis.

“Overall noninterest income as a share of bank revenue is lower than before the crisis, in part because of the collapse in securitization,” say Haubrich and Young. “However, service charges, one of the subcomponents of noninterest income, have increased.”

The data suggest that banks may also be relying more on noninterest income since the crisis. Once the researchers isolate service charges and exclude the parts of noninterest income most affected by the collapse of the financial markets, such as securitization, trading, and real estate, they found banks increased their reliance on service charges when their net interest margins were low, both before and after the crisis.

Read more: Trends in the Noninterest Income of Banks

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.455.4479