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Safety, soundness, and the evolution of the U.S. banking industry

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  • Robert DeYoung

Abstract

Although the banking system appears to be safer and sounder today than it was two decades ago, new risk challenges have arisen that could not have been anticipated in the 1980s. This article outlines the fundamental structural changes in the U.S. commercial banking industry since then. ; The author's strategic analysis of the current state of the industry compares the \"transactions banking\" business model practiced by large financial companies to the more traditional relationship-based banking business model. In particular, the author focuses on the different production technologies, product mixes, strategic behaviors, and risk-return trade-offs that characterize these two opposite approaches. In closing, the article discusses what these new developments may mean for the industry's ongoing safety and soundness.

Suggested Citation

  • Robert DeYoung, 2007. "Safety, soundness, and the evolution of the U.S. banking industry," Economic Review, Federal Reserve Bank of Atlanta, issue Q1-2, pages 41-66.
    • Handle: RePEc:fip:fedaer:y:2007:i:q1-2:p:41-66:n:v.92nos.1-2
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    File URL: https://www.frbatlanta.org/-/media/documents/research/publications/economic-review/2007/vol92no1_deyoung.pdf
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    Cited by:

    1. G. C. Lim & Sarantis Tsiaplias & Chew Lian Chua, 2013. "Bank and Official Interest Rates: How Do They Interact over Time?," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 160-174, June.
    2. Lee, Peter K.C. & Cheng, T.C. Edwin & Yeung, Andy C.L. & Lai, Kee-hung, 2011. "An empirical study of transformational leadership, team performance and service quality in retail banks," Omega, Elsevier, vol. 39(6), pages 690-701, December.
    3. Giovanni Melina & Stefania Villa, 2018. "Leaning Against Windy Bank Lending," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 460-482, January.
    4. Kick, Thomas & Koetter, Michael & Poghosyan, Tigran, 2010. "Recovery determinants of distressed banks: Regulators, market discipline, or the environment?," Discussion Paper Series 2: Banking and Financial Studies 2010,02, Deutsche Bundesbank.

    More about this item

    Keywords

    Banks and banking; Bank supervision;

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