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The universal bank model: Synergy or vulnerability?

Author

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  • Michael Brei

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Xi Yang

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper we examine empirically the relationship between banks’ income diversification, expansion into non-traditional activities and performance. Using detailed information on the U.S. banking sector over the period 2002-12, we investigate whether or not banks’ involvement in various business lines has been associated with higher accounting returns and risks. Over the long-term, we find robust evidence that banks’ expansion into non-traditional activities has lacked revenue and diversification benefits: overall risks of non-traditional banks have been higher, while returns were not. A higher degree of diversification across traditional and certain non-traditional activities, on the contrary, has been associated with important risk reduction benefits. The effects are non-linear and differ across business lines, which seems to suggest that an optimal mix of banking activities exists.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Michael Brei & Xi Yang, 2015. "The universal bank model: Synergy or vulnerability?," Post-Print hal-01671512, HAL.
    • Handle: RePEc:hal:journl:hal-01671512
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    Cited by:

    1. Ranjeeta Nayak, 2021. "Banking regulations: do they matter for performance?," Journal of Banking Regulation, Palgrave Macmillan, vol. 22(4), pages 261-274, December.

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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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