A top U.S. banker once said that the only time he gets worried is when he doesn't have a problem. A healthy bank, this gentleman believes, is a diversified one, and a diversified bank, by definition, always has a problem somewhere, one that is being offset by good to outstanding performance elsewhere in the organization.

The banker in question is a devotee of diversification. Counterparts in other banks aren't always as enthusiastic, however. Some have taken to minimizing the importance of diversification, arguing, as do many academics, that the shareholder doesn't value internal bank diversification because he or she can replicate its benefits simply by owning a basket of different bank stocks.

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