The aim of this study is to theoretically investigate the relationship between interest and noninterest income impact on insolvency risk of banks. The study reveals that in case of U.S banking and financial holding companies, the relationship between noninterest income is positive but at certain level of diversification, is beneficial for banks. Whereas, in case of E.U countries noninterest income is beneficial for profitability and it reduces insolvency risk. These results are similar to the studies which are conducted on Asian and Emerging economies. The paper aims to find out the policy implication for diversification but it depends on regions and countries.
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