High bank profitability linked to increased distress, challenges stability beliefs.
The study looked at whether high profits in banks affect the likelihood of them facing financial trouble in Europe. They used different indicators of high profits in their analysis. Surprisingly, they found that high profits don't actually decrease the chances of bank distress. In fact, there is some evidence that high profits might even increase the likelihood of bank distress happening within about 3 years. This challenges the idea that making banks more profitable will make them more stable.