This paper investigates the effect of revenue diversification on bank performance and risk. Using a panel dataset of 226 listed banks across 11 emerging economies and a new methodological approach, System Generalized Method of Moments estimators (System GMM), the results in this paper provide empirical evidence of the impact of the observed shift towards non-interest income generating activities on insolvency risk and bank performance. The core finding is that diversification across and within both interest and non-interest income generating activities decrease insolvency risk and enhance profitability. The results also show that these benefits are largest for banks with moderate risk exposures. By extension, these results have significant strategic implications for bank managers, regulators and supervisors who share a common interest in boosting bank performance and stability. We thank Robert Sauer, John Micklewright, Klaus Schaeck, Mohammed Amidu, Alistair Milne and an anonymous referee for helpful comments.

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This paper examines the effectiveness of capital outflow restrictions in a sample of 37 emerging market economies during the period 1995-2010, using a panel vector autoregression approach with interaction terms. Specifically, it examines whether a tightening of outflow restrictions helps reduce net capital outflows. We find that such tightening is effective if it is supported by strong macroeconomic fundamentals or good institutions, or if existing restrictions are already fairly comprehensive. When none of these three conditions is fulfilled, a tightening of restrictions fails to reduce net outflows as it provokes a sizeable decline in gross inflows, mainly driven by foreign investors.

This paper is an empirical analysis of competitiveness in the banking system of four out of the five East African Community (EAC) countries 2 . The results show that the degree of competition is low due to a combination of structural and socio-economic factors. By way of preview, the analysis ranks the countries in terms of banking sector competitiveness in the following order: Kenya,

This Working Paper should not be reported as representing the views of the IMF.