Risk Management

, Volume 18, Issue 4, pp 217–235 | Cite as

Bank risk shifting and diversification in an emerging market

Original Article

Abstract

This paper investigates risk shifting in commercial banks in the emerging market of Vietnam, where banks fund domestic asset portfolios almost exclusively from deposits and with limited issuance of securities. We investigate the relationship between these banks’ income diversification strategies and their overall level of risk during the recent period of deregulation and global financial crisis. Our results show that those commercial banks that have shifted to non-interest income activities in fact face higher levels of risk. This finding is at odds with theories that argue that diversification is a strategy for risk reduction and has broader implications for domestic system stability. The analysis provides a framework for evaluating these issues in other emerging markets.

Keywords

bank risk interest income non-interest expense diversification non-interest income Vietnam 

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Copyright information

© Macmillan Publishers Ltd 2016

Authors and Affiliations

  1. 1.Department of Banking & FinanceMonash UniversityCaulfield EastAustralia
  2. 2.Faculty of BankingUniversity of Economics Ho Chi Minh CityHo Chi Minh CityVietnam
  3. 3.CFVG Ho Chi Minh CityHo Chi Minh CityVietnam

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