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Model of Risk Diversification in the Banking Sector

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  • Karkowska Renata

    (University of Warsaw, Faculty of Management, Chair of Financial Systems of Economy, Szturmowa 1/3, 02-678Warsaw, Poland)

Abstract

Research background: Motivation for this study is the rapid development of conglomerate banking stimulated by the synergy between the traditional and parallel investment activity of banks before the 2007–2008 financial crisis. Existing studies do not answer the question about the positive influence of diversification on bank stability. They state that the combination of lending and non-interest income allows benefits to be derived from risk diversification. However, on the other hand they emphasise that non-interest and interest incomes are strongly correlated, which does not bring positive effects from diversification.

Suggested Citation

  • Karkowska Renata, 2019. "Model of Risk Diversification in the Banking Sector," Folia Oeconomica Stetinensia, Sciendo, vol. 19(1), pages 31-42, June.
    • Handle: RePEc:vrs:foeste:v:19:y:2019:i:1:p:31-42:n:3
    DOI: 10.2478/foli-2019-0003
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    References listed on IDEAS

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    More about this item

    Keywords

    banking; risk diversification; risk adjusted ROA; liquidity; credit risk;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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