Banking and Commerce: A Liquidity Approach

Joseph Haubrich and Joao Santos

Working Papers from London School of Economics - Centre for Labour Economics

Abstract: This paper looks at the advantages and disadvantages of mixing banking and commerce, using the "liquidity" approach to financial intermediation. Adding a commercial firm makes it easier for a bank to dispose of assets seized in a loan default. This 'internal market' increases the liquidity of such assets and improves the bank's ability to perform financial intermediation. More generally, owning a commercial firm may act either as a substitute or a complement to commercial lending. In some cases, a bank will voluntarily refrain from making loans, choosing to become a non-bank bank in an unregulated environment.

Keywords: BANKING; FINANCIAL MARKET (search for similar items in EconPapers)
JEL-codes: G15 G18 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1999
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Banking and commerce: A liquidity approach (2005)
Working Paper: Banking and commerce: a liquidity approach (1999)
Working Paper: Banking and commerce: a liquidity approach (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:lseple:9907

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