Income diversification and banking risk in the context of banking regulation in the WAEMU
Keywords:
Banking risk, Regulatory capital, Diversification, Banking regulation, WAEMUAbstract
The objective of this study is to analyze the link between income diversification and banking risk in a banking regulation context. After applying the generalized method of moments to a sample of 70 WAEMU banks over the period 2011-2018, it appears that the diversification of banks' income contributes to risk diversification. Furthermore, risk is further reduced when banks comply with capital adequacy standards. The result implies that income diversification and banking regulation are complementary in reducing banking risk.
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