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Other comprehensive income volatility and bank risk

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  • Su, Yang
  • Zhang, Junrui
  • Zhao, Hong
  • Zhou, Mingming

Abstract

In this study, we explore how banks manage risk in response to Other Comprehensive Income (OCI) volatility. We find that banks with high OCI volatility decrease perceived risk while increasing their contribution to systemic risk. As strategies in response to OCI volatility, banks reduce available-for-sale (AFS) holdings and loans, and expand the off-balance-sheet (OBS) entrusted loans and wealth management products. The effects on systemic risk and OBS activities are more pronounced under tight monetary policy but less so under macroprudential supervision. These results indicate that OCI captures the attention of banks in their risk management, yet their response to OCI volatility intensifies systemic fragility. The enforcement of OCI disclosure should be complemented by effective macroprudential supervision to ensure financial stability.

Suggested Citation

  • Su, Yang & Zhang, Junrui & Zhao, Hong & Zhou, Mingming, 2025. "Other comprehensive income volatility and bank risk," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:intfin:v:99:y:2025:i:c:s1042443125000058
    DOI: 10.1016/j.intfin.2025.102115
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    More about this item

    Keywords

    Other Comprehensive Income; Bank Risk; Off-balance-sheet Activity; Monetary Policy; Macro-prudence Policy;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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