Correspondent Blog
Tag: Geographic Diversification
05/15/24
Why Diversification Fails at Banks
Bankers have been taught to diversify their loan portfolio to reduce idiosyncratic (individual borrower) risk and to stabilize earnings. The thinking is that diversification-induced lending leads to banking resiliency. We believe that while lending diversification leads banks to lend more in normal times (especially for banks over $50B in assets) and does benefit the general…