Real resource utilization in banking, economies of scope, and the relationship between retail loans and deposits

Enzo Dia and David VanHoose

Economics Letters, 2019, vol. 177, issue C, 39-42

Abstract: Even though non-interest expenses on physical capital and labor comprise at least 40 percent of banks’ total costs, much of the banking literature entirely ignores real resource costs. This paper shows that whenever banks realize economies of scope in the use of resources, banks’ balance-sheet choices are inextricably linked to their decisions regarding employment of capital and labor and demonstrates that the intensity of capital utilization must be systematically related to the loan-deposit ratio. Based on U.S. banking data, we provide empirical evidence supporting this prediction.

Keywords: Bank loan-deposit ratio; Economies of scope; Bank physical capital intensity (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:177:y:2019:i:c:p:39-42

DOI: 10.1016/j.econlet.2019.01.018

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