The Role of Retail Banking in the U.S. Banking Industry: Risk, Return, and Industry Structure

18 Pages Posted: 27 Sep 2007 Last revised: 10 Jun 2008

See all articles by Timothy Clark

Timothy Clark

Federal Reserve Bank of New York

Astrid Andrea Dick

Federal Reserve Bank of New York

Beverly Hirtle

Federal Reserve Bank of New York - Banking Studies Department

Kevin J. Stiroh

Federal Reserve Bank of New York

Robard Williams

Federal Reserve Bank of New York

Abstract

The U.S. banking industry is experiencing a renewed interest in retail banking, broadly defined as the range of products and services provided to consumers and small businesses. This article documents the return to retail in the U.S. banking industry and offers some insight into why the shift has occurred. At the bank level, the principal attraction of retail banking seems to be the belief that its revenues are stable and thus can offset volatility in nonretail businesses. At the industry level, the authors show that interest in retail activities fluctuates in rather predictable ways with the performance of nonretail banking and financial market activities. They document the features that the recent return to retail has in common with past cycles, but also identify factors suggesting that this episode may be more persistent. The most important of these factors is the role of large banks: this retail banking cycle is being driven almost entirely by the very largest U.S. banking firms. The key role of very large banks gives extra weight to this retail banking episode.

Keywords: banking

JEL Classification: G21, L22, L25

Suggested Citation

Clark, Timothy and Dick, Astrid Andrea and Hirtle, Beverly and Stiroh, Kevin J. and Williams, Robard, The Role of Retail Banking in the U.S. Banking Industry: Risk, Return, and Industry Structure. Economic Policy Review, Vol. 13, No. 3, December 2007. Available at SSRN: https://ssrn.com/abstract=1017351

Timothy Clark

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Astrid Andrea Dick

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Beverly Hirtle (Contact Author)

Federal Reserve Bank of New York - Banking Studies Department ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7544 (Phone)
212-720-8363 (Fax)

Kevin J. Stiroh

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
(212) 720-6633 (Phone)
(212) 720-8363 (Fax)

Robard Williams

Federal Reserve Bank of New York

33 Liberty Street
New York, NY 10045
United States

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