Diversification in Banking: Is Noninterest Income the Answer?
AbstractThis paper assesses potential diversification benefits in the U.S. banking industry from the steady shift toward activities that generate fee income, trading revenue, and other types of noninterest income. In the aggregate, declining volatility of net operating revenue reflects reduced volatility of net interest income, not diversification benefits from noninterest income, which is quite volatile and increasingly correlated with net interest income. At the bank level, greater reliance on noninterest income, particularly trading revenue, is associated with lower risk-adjusted profits and higher risk. This suggests few obvious diversification benefits from the ongoing shift toward noninterest income.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 36 (2004)
Issue (Month): 5 (October)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Kevin J. Stiroh, 2002. "Diversification in banking: is noninterest income the answer?," Staff Reports 154, Federal Reserve Bank of New York.
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- "Making Sense of Obamaâs Bank Reform Plans"
by Mark Thoma in Economist's View on 2010-01-24 20:31:00
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