Bank Diversification: A Comparative Study on US and Japanese Banking

ABSTRACT Bank diversification/focus strategies have a significant impact on banks’ riskiness and returns and consequently affect the overall health of the financial system and the economy. Focusing on the aggregate numbers of banking systems from two major economies and advanced financial systems from both sides of the Pacific, this study comparatively analyzes the diversification/focus status of US and Japanese banking systems at asset, liability, deposit, income, and expense categories. The results show major differences between these two leading banking systems, and their banks’ diversification strategies.