Benefits and Costs of Integrated Financial Services Providers (IFSP) – State-of-the-Art in Research

EU‐China BMT Working Paper Series No. 006

26 Pages Posted: 4 Dec 2010

See all articles by Horst Loechel

Horst Loechel

China Europe International Business School (CEIBS); Frankfurt School of Finance & Management

Heike Brost

Frankfurt School of Finance & Management

Helena Li

Frankfurt School of Finance & Management

Date Written: January 1, 2009

Abstract

This paper aims to review the theoretical findings and empirical evidence of the benefits and costs of integrated financial services providers (IFSP) and draw inferences of developing IFSP in emerging markets with special consideration on China. The overall results can not conclude the superiority of IFSP or of segregated financial institutions. In opposite, the evaluation of the integration or segregation of financial institutions should always be embedded in the regulatory and managerial context.

However, we could draw some implications that developing IFSP is of special relevance for emerging countries: The existing dominance of banking institutions in emerging national economies with the co-existence of underdeveloped capital markets can be leveraged for capital market innovation if lending, underwriting and brokerage services are available under one roof for the current client base. Cross-selling of banking and insurance products through bancassurance can better serve retail clients with comprehensive advisory for sophisticated life-time financial planning and can better complement the undeveloped social security system in emerging countries. Relationship banking and bank monitoring can better solve the problem of information asymmetry in emerging markets with lower transparency, underdeveloped corporate governance standard and weaker contract enforcement mechanism.

As China is almost the unique country in the world still with commercial bank law favoring segregated financial system and the current ongoing deregulation process on the incremental trial basis is progressing, understanding the benefits and costs of IFSP can be of special importance as the next cornerstone for China’s banking reform.

Keywords: integrated financial services provider, universal banking, bancassurance

JEL Classification: G20, G21, G28

Suggested Citation

Loechel, Horst and Loechel, Horst and Brost, Heike and Li, Helena, Benefits and Costs of Integrated Financial Services Providers (IFSP) – State-of-the-Art in Research (January 1, 2009). EU‐China BMT Working Paper Series No. 006, Available at SSRN: https://ssrn.com/abstract=1718177 or http://dx.doi.org/10.2139/ssrn.1718177

Horst Loechel

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Heike Brost

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Helena Li (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

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