Bank profitability is associated with lower systemic risk – IMF paper

Profit and loss

Higher bank profitability is associated with lower risks at an institutional and systemic level, researchers from the International Monetary Fund find.

In the paper, TengTeng Xu  Kun Hu and Udaibir Das examine the relationship between bank profitability and financial stability using data from 431 publicly traded banks, from 2004 to 2017.

They find that over-reliance on non-interest income (NII), wholesale funding and leverage is associated with higher systemic risk. This is particularly true

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