The universal bank model: Synergy or vulnerability?

Michael Brei and Xi Yang ()
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Xi Yang: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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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.

Keywords: Banking; diversification; non-traditional activities; risk; profitability (search for similar items in EconPapers)
Date: 2015
Note: View the original document on HAL open archive server: https://hal.science/hal-04141415
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Related works:
Journal Article: The universal bank model: Synergy or vulnerability? (2019)
Working Paper: The universal bank model: Synergy or vulnerability? (2019)
Working Paper: The universal bank model: Synergy or vulnerability? (2015)
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