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Banking and Commerce: A Liquidity Approach

Joseph G. Haubrich

Federal Reserve Bank of Cleveland

João A. C. Santos

Federal Reserve Bank of New York

April 2000

BIS Working Paper No. 78

This paper looks at the advantages and disadvantages of mixing banking and commerce, using the "liquidity" approach to financial intermediation. Bringing a nonfinancial firm into a banking conglomerate may be advantageous because it may make it easier for the bank to dispose of assets seized in a loan default. The internal market formed inside the banking and commerce conglomerate increases the liquidity of such assets and improves the bank's ability to perform financial intermediation. More generally, owning a nonfinancial 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.

Number of Pages in PDF File: 34

Keywords: Banking, commerce, liquidity, synnergies, economies of scope

JEL Classification: G21, G28, G34

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Date posted: December 13, 2005  

Suggested Citation

Haubrich, Joseph G. and Santos, João A. C., Banking and Commerce: A Liquidity Approach (April 2000). BIS Working Paper No. 78. Available at SSRN: http://ssrn.com/abstract=237170 or http://dx.doi.org/10.2139/ssrn.237170

Contact Information

Joseph G. Haubrich (Contact Author)
Federal Reserve Bank of Cleveland ( email )
East 6th & Superior
Cleveland, OH 44101-1387
United States
216-579-2802 (Phone)
216-579-3050 (Fax)
João A. C. Santos
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)
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References:  23
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