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What is the Value-Added for Large U.S. Banks in Offering Mutual Funds?

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  • Edward J. Kane

Abstract

This paper argues that an implicit deposit-insurance credit enhancement is extended to any nondeposit savings vehicle offered by a very large bank. This unpriced credit enhancement helps to explain the preference revealed by very large U.S. banks for gearing up to offer mutual funds instead of developing index-linked deposit products. It also explains why large banks have been more eager than small banks to offer mutual funds and why bank mutual funds could be priced to grow at a time when bank deposits were being priced to shrink.

Suggested Citation

  • Edward J. Kane, 1995. "What is the Value-Added for Large U.S. Banks in Offering Mutual Funds?," NBER Working Papers 5111, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5111
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    References listed on IDEAS

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    1. Phillip R. Mack, 1993. "Recent trends in the mutual fund industry," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Nov, pages 1001-1012.
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    Cited by:

    1. Santiago Carbó Valverde & Francisco Rodríguez Fernández, 2004. "Scope Economies and Competition Beyond the Balance Sheet: a ‘broad banking’ Experience," Economic Working Papers at Centro de Estudios Andaluces E2004/13, Centro de Estudios Andaluces.
    2. David E. Allen & Jerry T. Parwada, 2004. "Effects of Bank Funds Management Activities on the Disintermediation of Bank Deposits," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(7‐8), pages 1151-1170, September.
    3. Carbo Valverde, Santiago & Fernandez, Francisco Rodriguez, 2005. "New evidence of scope economies among lending, deposit-taking, loan commitments and mutual fund activities," Journal of Economics and Business, Elsevier, vol. 57(3), pages 187-207.
    4. David E. Allen & Jerry T. Parwada, 2004. "Effects of Bank Funds Management Activities on the Disintermediation of Bank Deposits," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(7‐8), pages 1151-1170, September.

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